Monday, April 28, 2008

Some Oils Setting Up - Are You a Risk-Taker?

This is the stock I took a small position in today. I am hoping for a breakout here and if it doesn't happen, I will exit the stock quickly. I may add to this but won't make it a large position due to its lack of great fundamentals.

IDRACharts from Telechart2007, Courtesy of Worden Brothers, Inc.

A few charts setting up. CSIQ continues to be a stock that I like due to its fundamentals and tremendous growth, but the chart isn't perfect. It could be forming a handle here but it is a little choppy. I will keep an eye on it to see if it can get above this short-term trendline.

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

A lot of the setups I saw tonight were oil stocks that have pulled back and consolidated some of their recent gains. My main worry with these is that if the Fed finally decides to fight inflation and pauses Wednesday, or even suggests that it is done cutting rates, then commodity stocks are likely going to be hit. The ags look very toppy here but many of the oils have held up pretty well. I don't know if this is a risk I want to take here.

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Overall, I still am not seeing a ton of low-risk setups, so I will remain cautious overall. If you look at the stocks I put up this weekend, some are still looking decent, so if you are looking for long candidates, check them out.

We are really in the heart of earnings season now, and one of the strategies that usually work well in an uptrending market is buying stocks of smaller stocks that post great earnings in a surprise fashion. I have not really discussed this strategy, but it has been documented on several blogs I follow and I have used it before with success. I plan on writing a post describing what I look for in an earnings-related play sometime this week. I haven't seen too many opportunities in this arena yet this year, mainly because I look for unknown stocks putting up great earnings, like WSCI. This stock put up a 179% gain in earnings and a 45% gain in sales on April 3, and if you check the chart out, you can see what it has done since. That type of growth and reaction from the earnings is what I look for. UFPT is another stock that put up nice earnings (March 6) but looking at the chart, I probably would have been stopped out of the stock after buying it. But it has moved much higher since then, likely based on their earnings. SOHU is a stock that posted excellent earnings today, but is a little bigger than I look for in these plays. It was also extended going into this report. However, I will watch it carefully and if it can rest, I would be willing to jump on. The catalyst (today's report) is now out there for it to continue higher if the market cooperates.

I don't expect this market to do much of anything tomorrow because of the Fed. So it is likely to be a boring few days, but that's not a bad thing with the market being overbought. Best of luck tomorrow.

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