Weekend Strategy Review October 6, 2013 A Few More Comments
Posted by OMS at October 6th, 2013
Here’s a few more stocks that were sent in after I posted the WSR.
Brian M. asked about Timken, TKR. He said he thinks the stock looks like a good buy once all indicators turn positive. He believes TKR to be in a wave 2 down with tight bands forming for a wave 3 up.
Hmmm? When I look for a pattern in TKR, I have to go back to October 2012, when the stock was trading at 39. From that point, it moved to the 58-59 level in mid-March 2012 before correcting to 50. So if I were to place a target on TKR, I would simply add the 20 points from the ‘stick’ to the low of 50, coming up with a target near 70. The stock is currently trading near 60. The Bands are getting tight, but I would like to see them get even tighter.
However before I would buy TKR, I would need to see all of the PT indicators turn positive.
One stock that nobody sent in was Apple, AAPL. To be honest, I was very surprised. As you know, I have been talking a lot about AAPL recently. And there is a reason why. AAPL appears to be in the process of turning around.
APPL ‘Jumped the Ropes’ in mid-August, indicating a wave 1. And after the rope jump, it pulled back in what appears to be a classic wave 2. The last time I talked about AAPL, I mentioned that the 50 was still below the 200, but it was getting close to moving above the 200, putting the stock into an Uptrend. Well, now that has happened. AAPL is now in an Uptrend! It doesn’t look like much on an Uptrend, but nevertheless, it is. Wave 3 Up could be starting. All it would take now is for the PT indicators to turn positive. The ‘stick’ on AAPL is a little over 100 points. So IF I add those 50 points to the low of 477 made on 16 September, I come up with a target near 577 to 580.
During the past month, while the Dow and S&P have been pulling back, the NASDAQ has been relatively strong. QQQ and QLD stayed on the Dean’s List. This is something that you should pay attention to and factor into your stock picking as we move forward. And now that AAPL is looking like it wants to move higher, it could do wonders for the NASDAQ, and a lot of the other stocks associated with the index. So pay attention to AAPL this week and watch the indicators.
I know that a lot of you don’t like to trade high prices stocks, like AAPL. Get get over it. Let me tell you something. The institutions do. And while they have been avoiding APPL for the past year because the stock has been in a downtrend, don’t be surprised if you start to see the Big Boys return now that it’s in an Uptrend. Remember, a 10 percent increase in a stock is a 10 percent increase. It doesn’t matter if the stock is selling for 50 bucks or 500. A ten percent increase in a 50 stock takes it to 55. The same 10 percent increase in the 500 stock takes it to 550. If you had $20,000 to invest, you could buy 400 shares of the 50 stock. On the other hand, if you chose the 500 stock, you would only receive 40 shares. But at the end of the day, IF both stocks went up 10 percent, you would make the same amount of money, which in this case would be $2,000.
The reason I would choose the 500 stock every time over the 50 stock is because I know this is where the institutional money is going to be. And there is nothing better than being on the playground when the institutions decide they want to get into your game.
So this week, you might want to take another look at AAPL. If it starts to break the recent high of 497 made on 23 September, you might want to pay attention. The Big Boys could be getting ready to play.
Last week, I mentioned that Sandisk Corp, SNDK, had a nice HSw/Blade Pattern. It was trading near 60. On Friday, the stock jumped another 1.18 points to close 62.69. The stock has a stick of about 8 points, which puts the short-term target near 66. I mention SNDK today because it has the type of short-term pattern that you should be looking for now. It’s the kind of pattern that can give you a quick pop, and then IF AAPL starts to push the NASDAQ higher, it could give you a nice long ride.
Same for EBAY. The stock hasn’t done much lately, but if you look at the pattern it has been forming on a weekly chart for the past year, you might like it a lot better. If the stock can move above the 57.75 level, there’s an enormous ‘Stick’ of almost 30 points that when combined with an APPL driven NASDAQ, could push it significantly higher.
These are just a few stocks from the middle of the MWL. Others are LRCX, GLPW, CAH, MT (if it can move into an Uptrend), RYL, DOW, SBNY (if I were looking for a bank, I would have to look closely at this one. Nice pattern & P-vol).
If you’re looking for a possible turn around candidate, you might want to watch China Pete and Chemical, SNP. It had a ‘Rope Jump’ recently and now appears to be in the process of forming its wave 2. The Bands are narrowing, and as long as the PT indicators stay positive, the stock will remain interesting. The stock carries a P/E of 8 with a ROE of 13 percent.
As a learning experience, I would urge you to look at BIDU, and the pattern it formed about a month ago. Note the HSw/Blade Pattern with the tight Bands. This is what you should always be looking for. Same for SLB. Right now there aren’t any stocks on the MWL that have similar patterns. But wait another week or so. Then go back and look at all of the stocks I mentioned yesterday and today. Things could look a lot different with another week’s worth of sideways trading.
That’s what I’m doing.
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