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us stock market, top stock pick
Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q: How can you tell the difference between a blow-off top and a good volume move, breakout?
A: A blow-off top is a ballistic run where a stock makes its final, ballistic move in a long run and then rolls over and gives most of the final run back and even more in some instances. It is thus a good thing to recognize when it occurs as it can cost you some big gains. Better to lock in then pick up the stock again after it forms up another good pattern and breaks out, that is, if it does.
The basic difference between a "proper" breakout and a blow-off top is that the former will come from a solid, well-developed pattern while the latter occurs after a long run, typically after the breakout and run higher in a late stage base. A late stage base is a fourth or fifth base such as a cup with handle in a series of bases and breakouts. A blow-off top is characterized by extreme high volume and a very rapid increase in price, followed by a relatively rapid sell-off. Volume in a blow-off top is on the strongest or close to strongest volume of the run. A breakout, on the other hand, is when a stock is just beginning a run, showing a definite surge in volume (though not ballistic) as it moves out of the well-defined pattern, and will in most cases fall back but can catch support on the test and continue the trend higher.
A stock can, in a blow-ff top, gain 50% to 100% in a short time (usually occurring over a few days) on extreme volume. What accounts for the huge volume? It becomes a 'got to have' stock. The big money that bought when it made one of its breakouts from its series of bases leading up to this move is using the rush of buyers to exit the stock. Hence the huge volume. The trouble is that by this time it is really too late since the stock has already made its run. A good example of this is QCOM in late 1999. The stock had been trending upward mid-year after bouncing up its moving averages then on huge volume blasted up into a blow-off top as technology stocks had their glory days. It tested briefly then blasted up
again; this time volume was markedly lower and the stock's stretch was doomed. The stock retraced every bit of the move within 6 months. While the bear market of course did not help it get back on its feet, it is just now starting to show life, breaking out of a small double bottom with handle last week.
Thus, the key to confirming the difference between the two is to understand how the stock has been moving prior to the move higher. Was it in a good pattern, or did the stock just blast out of a steady uptrend on screaming volume? In other words, where in the life history is the stock and is it showing attributes of excess.
SEMINARS ON CD
http://www.stockseminarsonline.com
This is Jon Johnson's own site devoted exclusively to seminars designed to teach you what you need to know about the stock market and stock movement and how to take advantage of those moves without incurring the usual high costs of travel and related expenses usually associated with seminars.
THE PLAYS:
Good movers Friday: BDY; CHS; HDTV; NFLC; SPIL; STM TKLC
New Plays:
Upside:
Play Date: 08/30/2003
BKST (Brookstone--$28.25; -0.6; no options): Useful gadget stores. Splits 3:2 on 9-24-03.
http://biz.yahoo.com/p/b/bkst.html
STATUS: Pre-Split, 18 day MVA test. BKST is stair-stepping up the short term MVA after a big breakout in late June. It is making the third test of the 18 day, and stocks typically bounce 4 to 5 times up off of this level on their runs. As this is a pre-split, it still has plenty of upside for us to make some solid money. Excellent money flow and a relative strength breakout again on this last run. It has pulled back the past week, showing a loose hammer doji over the 18 day MVA (27.33) Friday. These are the tests we love to see on pre-splits, and we catch them as they make the rebound. The idea is to be ready for the move and make it quickly when it comes. This pattern helps a lot and is very conducive to a nice pre-split move.
Volume: 93.489K Avg Volume: 58.414K
BUY POINT: $28.65 Volume=90K Target=$33 Stop=$28.06
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/bkst.html
Play Date: 08/30/2003
ICST (Integrated Circuit System--$34.52; -0.19; optionable): Semiconductor integrated circuits
http://biz.yahoo.com/p/i/icst.html
STATUS: Cup w/handle. ICST is moving through a 7 week base showing solid 3 to 0 accumulation (3 up weeks on rising volume to 0 down weeks on rising volume). Last week it moved laterally over 34 and the 10 day MVA (33.47), showing nice, tight dojis on lower, below average volume. This base has formed after the May breakout from a 7 month base, a very nice short consolidation as the market overall took a breather. Strong money flow and a relative strength breakout. ICST is posed to make the breakout move.
Volume: 467.078K Avg Volume: 1.784M
BUY POINT: $35.32 Volume=2.7M Target=$42.38 Stop=$33.42
POSITION: IUY AG - Jan. $35c (52 delta) &/or Stock
http://www.investmenthouse.com/ci/icst.html
Play Date: 08/30/2003
MOBE (Mobility Electronics--$7.50; -0.11; no options): Power adaptors, etc. for mobile computing
http://biz.yahoo.com/p/m/mobe.html
STATUS: Cup w/handle. The age of truly mobile computing is just starting to emerge, finally reaching some of the promise of the computer age. MOBE is one of those companies that is riding the wave. It is now forming the handle to a short 5 week base formed after a strong break higher in late May and a strong rally. Accumulation in the short base is 2 to 0, money flow is strong, and relative strength broke out. A very strong stock and a leader. Looking for the next chance to get into it.
Volume: 528.805K Avg Volume: 520.68K
BUY POINT: $8.04 Volume=781K Target=$10 Stop=$7.48
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/mobe.html
Play Date: 08/30/2003
MOVI (Movie Gallery--$21.42; +0.73; optionable): Music & video stores
http://biz.yahoo.com/p/m/movi.html
STATUS: Flat base. MOVI is making the break from a 7 week flat base showing strong 3 to 0 accumulation. The stock has been using the 50 day MVA (19.98) as support in the pattern. Friday it surged higher, moving toward the breakout on rising though still below average volume. Relative strength is moving toward a breakout as well, a good indication of the strength of the move.
Volume: 245.218K Avg Volume: 278.997K
BUY POINT: $21.94 Volume=418K Target=$26.42 Stop=$20.48
POSITION: QLV LD - Dec. $20c (69 delta) &/or Stock
http://www.investmenthouse.com/ci/movi.html
Play Date: 08/30/2003
NSM (National Semiconductor--$29.14; +0.5; optionable): Semiconductors
http://biz.yahoo.com/p/n/nsm.html
STATUS: Test breakout. NSM made us some money earlier, and we took some gain when the market looked a bit iffy after the Friday reversal two weeks back. That turned out to be too cautious as NSM tapped the 10 day MVA and bounced right back up. It has moved between 28 and 29 the past three sessions, holding up well and setting up for the next move. NSM just broke from a 3 month base showing excellent 6 to 1 accumulation (6 up weeks on rising volume to 1 down week on rising volume), has strong money flow, and relative strength has broken out on the move. NSM was an early leader in the chip sector, and after this little 10 day MVA test it looks ready to continue the move. That is where we want to hook up with it again.
Volume: 2.423M Avg Volume: 3.496M
BUY POINT: $29.72 Volume=5M Target=$35 Stop=$27.38
POSITION: NSM AF - Jan. $30c (50 delta) &/or Stock
http://www.investmenthouse.com/ci/nsm.html
End part 2 of 3
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us stock market
top stock pick
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