Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Curious divergence

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It seems there’s been a lack of broad strength as the market has rallied. What caught my eye today was the very few stocks in the Investor’s Business Daily’s “Stocks on the Move” tables. Their table shows fundamentally strong stocks moving on higher volume. (Volume is the key to validating a stock’s move.) At one point today, only eight stocks were shown that meet the IBD’s criteria. To my eye, when the market is making new highs, you should have a full table of them with a minimum of 100% volume gain to get on the list.

Balance that with the sell off at the end of the day, pushing the Nasdaw lower, and I’m going to count this as a distribution day. A few more days of selling on increasing volume can take the starch out of a rally.

Days like today re-emphasize the importance of investing at proper buy points, i.e. staying in the sidelines and waiting to pounce when a stock starts moving in your direction. Be patient. When we get a solid rally, there will be many buying opportunities.

The indexes are at “C” or “B” Accumulation/Distribution ratings, indicating at least a balance of buying pressure lately, which is an improvement over last month’s “E” and “D” ratings.

From investors.com: Click, then click “learn more” in the Stocks on the Move table.

The qualification criteria for listing in ‘Stocks On The Move’:
Stocks must trade on the Nasdaq or New York Stock Exchange.
Stock price must be at least $20.00 ($16.00 for Nasdaq).
Stocks must have a price change of 1/2 point or more.
50-day Average Volume must be a minimum of 60,000 shares.
For stocks up in price only, the Earnings Per Share (EPS) and Relative Price Strength (RS) Ratings must each be a minimum of 70, Accumulation/Distribution Rating must be D+ or better and next year’s earnings estimate must be 15% or higher from the previous year’s earnings. (Stocks without earnings estimates are included.)

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Written by heyercapital

April 18, 2007 at 7:38 pm

Posted in stock ideas

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