Heyer Capital, LLC

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

Archive for the ‘charting’ Category

Facebook IPO

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I’m sorry that it seems like rather stoogish to post about the Facebook IPO now that it has already started trading.  However, it’s always a good idea to remind folks that the soundest way to “play” IPOs is to wait for them to trade for a while and form a solid base. (“Gee, thanks Brian. What the heck does that mean?”)

Facebook is trading at $39.61 this instant.  For a much-hyped Wall Street IPO, that’s a dud. But by waiting for a base to form over the next few months, we keep a safer edge in our favor.  We let the market sort out what the stock is really worth, what its prospects really are.  (Especially after the IPO lockup expires and insiders and underwriters can start to sell their shares and after the hype has diminished.)  Golly, maybe $39 is a screaming bargain.  Or its all downhill from here.  But if we wait for the supply and demand for shares work itself out, we’ll can be more confident that if it does burst up from a consolidation in a few weeks or months, the odds are more in our favor than blindly buying the first chance we get.

Everything looks rosy when a company IPOs.  (That’s Wall Street’s job: to separate your money from you.)  It’s your job to be patient and let the euphoria run off and use discernment.

(I hasten to add that, following my own advice, I’m not touching this one with a ten foot pole. Yet.)

Written by heyercapital

May 18, 2012 at 10:07 am

Expectations: Mish’s Global Economic Trend Analysis

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Mish’s Global Economic Trend Analysis.

Mish’s posting linked above is a must-read-and-understand summary of expectations for stock investors who stick, unfortunately, with ‘buy and hold’ methodologies.

Written by heyercapital

August 23, 2011 at 4:44 am

Posted in charting, macro econ

Be wary of distribution days in a young rally

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The June 2010 rally attempt began June 8, at Point A (see below), as the market indexes undercut the prior low price, but closed higher.  At Point B, June 15, the market gave a Follow Through Day on the 6th day of a rally attempt, which historically bodes well.  (A Follow Through Day is thought of as a confirmation that the correction has ended and a new rally has begun. The Investor’s Business Daily reports that a Follow Through Day on Day 4-7 of the rally attempt is usually a strong signal.)

At Point C, June 21, the market made a strong advance during the day, but retreated and closed lower.  That reversal was quickly followed in three of the four next trading sessions by distribution days of lower closes on volume that is higher than the prior day.  Therefore yesterday’s 268 pt drubbing of the DJIA (and 3% loss in the Nasdaq) cannot be too surprising.

We are in a correction. The plan from this point is to wait for the next eventual and inevitable Follow Through Day signal.

Be wary of quick distribution days after a rally begins

Written by heyercapital

June 30, 2010 at 10:14 am

Abiding the follow-through-day

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We are in a correction. Hopefully you lightened the load with my April 27 post about Greece and knowing where the exits are.  (Be sure to subscribe to my RSS feed with your browser to stay on point with my outlooks.)  But what about deciding when getting back in?

Recognize how the market puts in a bottom. As the correction unfolds, the indexes will make new low after new low interspersed with intraday or daily gains. (The market never moves in a straight line in either direction.)  On a chart, where it’s easier for me notice such things,  a major index will undercut the prior low price of the leg down. Yesterday, May 25, that occurred when the S&P 500 moved below the low of the May 6 “Flash Crash.”  (See Point A.)

An undercut resets the waiting period for a follow through day
Yesterday is “Day 1” of the rally attempt. It seems overly simplistic to say that “just not going lower” means a rally attempt is underway, but that’s exactly it.
Now we wait for the Follow Through Day to come on Day 4 or later of the rally attempt. The 25th + 4 days gives us Friday as the soonest we can trust a Follow Through Day.
FAILURE?
If the market indexes breech the lows of the 25th, then that particular rally attempt is kaput.  Each new low begins the rally count again until either the low is taken out again, or we receive a Follow Through Day.   Be sure to click on the tag of this post to see my other explanations of the Follow Through Days.

Written by heyercapital

May 26, 2010 at 9:06 am

Resistance becomes support

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Reviewing charts this morning, I noticed a concept that was worth sharing with you.  After Bucyrus broke out of a base in early Oct 09, it hit resistance at around $50, at Point A.  Rebuffed, it tread water for a couple weeks, before pressing through.  That $50 price level (drawn with a crayon, and not a fine line sharpie) then acted as a hammock through November and December (Point B).

Even after the stock advances and peaks in January, it retraces its move all the way back down to that $50 (Point C. )

lines of resistance can become support as bases develop

Where does it go from here? I’d like to see it form a cup and handle, with a handle peak up near $65-66. The stock, like many others, has been through the wringer the past two years, and it will take sound base formations to work through those emotional excesses.

It’s also helpful to note for investors using 50 day moving averages as buy/sell signals, BUCY just yesterday crossed over its 50 day simple moving average (SMA).

Written by heyercapital

February 17, 2010 at 9:50 am

Posted in charting, stock ideas

exclamation points

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As you scan through charts of fundamentally sound stocks, be sure to note the ones that jump in high volume.  I call these indicators “exclamation points.”

Below is an example, Panera Bread Company from Oct. 2009.  The stock carved a cup with a handle pattern from mid-Sept through the handle beginning at point A.   A proper buy point is ten cents above the high price at the start of the handle, at A.

At point B, PNRA announced earnings, beginning a four month, $12 per share move.

Also note that PNRA clung to the 50 day moving average (green line) through the base forming in October (point C.) That’s a good sign of institutional support of a stock as it carves a pattern.

PNRA Panera Bread making an exclamation point in Oct '09

Written by heyercapital

February 12, 2010 at 10:51 am

Identifying the start of a stock rally

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Our good friends at the “Investor’s Business Daily” newspaper print their outlook on the stock market right on the front page each day .  (I think it’s the most expense daily newspaper in America, and worth every penny. Get a free two week trial subscription here. And, no, they haven’t paid me to say this.  I just want smart readers.)

On to business…

IBD’s research of all the stocks market rallies over the past century, show that they all start the same way: with a “follow through day” of a stock index leaping up at least 1.8%.

Rally's "Follow Through Day" in July '09

The rally Follow Through Day must occur on Day 4 or later from the bottom of the correction.   You can see at the end of June in the chart above, there was a big day of gains, BUT that didn’t come on Day 4 or after.

It’s important to know that “Follow Through Days” are not blind green lights to buy anything and everything.  Wait to buy stocks at good breakout points from sound chart patterns on heavier volume.  Don’t fall in love with a stock because “it’s cheap.”  Cheap stocks can get cheaper.

Since we’re still in a correction at this point, use this “down time” to research, research, research stocks.   Today, Feb 10, we’re on Day 3 of the rally attempt (after the lows in this move put in on the big reversal day Feb. 5) keep your watch lists ready for the Follow Through Day which could come as soon as tomorrow -Day 4.)

Written by heyercapital

February 10, 2010 at 11:52 am