Heyer Capital, LLC

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

Archive for May 2008

CMP Compass Minerals

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You wouldn’t think there’d be that much money in selling salt, but Compass Minerals is making a go of it.  (Demand for their potash helps too.) 

CMP cleared a double bottom base (with a handle) at Point A on heavy volume Point B.  Note along the ellipses how it glides along 9 and 21 day moving averages, which I think are good signs of buying support.  It now appears to be carving a cup with handle base, with a possible buy point at Point C, ten cents above its high in the handle.

Note that we’re in a market correction now, during which prudence dictates great caution in committing capital,  no matter how beautiful that chart. 

 

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Written by heyercapital

May 28, 2008 at 7:58 am

Posted in Uncategorized

BKX (Big) Bank Index

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The BKX (Big Bank) Index is staggering around multi-year lows and, from a technical perspective, more importantly, have given three lower highs and four tests of support.    Each time a stock or index falls to a given price, it absorbs a layer of demand at that price. Think of what such a chart is showing you, as a true snapshot of supply and demand.    

I don’t want to remind you what happens when there is no demand at a certain price, particularly since the money center banks are such a crucial part of the capital markets.  Their falling equity prices clouds their ability to raise capital.  Income statements show the past, and balance sheets show the future. 

This might also be an abject lesson in trying to bottom fish and “buy stocks for the dividends.”  Caveat emptor.   

 

 

Written by heyercapital

May 27, 2008 at 11:31 am

Posted in charting, stock ideas

Distribution days

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Stock market caution is warranted here.  Folks should sit up and take notice whenever the Dow sheds 500 pts in two days.   But two days do not make a robust sell signal. Let’s look back a couple weeks for perspective. 

In this chart the S&P 500 has logged several distribution days in recent weeks, and they are marked with arrows. (Distribution days occur when the markets close lower in price, with higher trading volume. Action of leading stocks will color & nuance the analysis, so it’s not a black and white definition. YMMV.)   The intra-day reversal on May 19 (climb into movement highs on weak volume, then faltering and falling) at Point A was another signal for caution.  The May 19 action combined with the May 2 prior movement top give us a double top to work through before an advance can occur. 

Don’t hesitate to leave a comment or drop me an email if you have a question.

Written by heyercapital

May 21, 2008 at 10:00 pm

IPO: BX Blackstone or SOL – Renesola

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One of the core ideas of the Investor’s Business Daily is that powerful earnings growth is the driver behind big stock moves.  As a corollary, big stock market winners are often found in new companies, companies that have IPO’d with less than eight years on the market.  What is the rationale behind this? Why did IBD’s research find this to be the case?  In a word, it’s innovation. Companies with successful new products or new management win market share and can make money hand over fist. With a turnaround showing up in the numbers, Wall Street sits up and takes notice, bidding up the stock price.

 

A good place to “shop” for stocks is among those that have recently IPO’d and just come to market.  Should you just buy it straight away from a syndicate broker?  Generally no.  Instead, wait for the stock to make its first base, or consolidation, and judge it’s action from there.

 

Blackstone (BX) is a good example of a failed IPO.  By failed, I mean failed for the Joe and Mary Lunchbuckets that bought the stock hoping to play along with the big boys in private equity.  It was obviously a winner for those that unloaded dear shares onto the market. (See the recent lesson in LVS for a primer.) 

 

 

This next one shows the rewards for waiting for a confluence of a market up-trend, hot sector, and idiot momentum money.  With a ticker named after our sun, SOL, you can figure out quickly this is a solar stock. In this market, facing $120+ oil, solar power is coming into comparative costs with other sources and the market is taking notice.  IBD puts SOL’s earnings growth in the top 1% of public companies.  That’s what I like to see. 

The stock put in a saucer base nearly three months long (Point A) emerging in a solid breakout at Point B. What if you missed that break out as a trade?  No fear.  Stocks that charge ahead like that will often make subsequent bases, providing reasonable entry points.  At Point C it started a new base that lasted nary a month.   A proper buy point is when it emerges from that base into new high ground Point D.  The logic is simple:  all stocks are bad unless they are ready to go up. A stock treading sideways may be suffering from distribution; waiting until it emerges from a base into new high ground puts the odds in your favor. 

Note how along this month’s advance, the daily lows glide above the 5 day moving average line. For quick traders (scalpers), consider a violation of that 5 DMA as a sell stop level. 

 

Written by heyercapital

May 20, 2008 at 11:12 am