Heyer Capital, LLC

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

Archive for the ‘Investor’s Business Daily’ 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.)

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Written by heyercapital

May 18, 2012 at 10:07 am

Hindenburg Omen

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It’s a minor victory when the general media express an interest in technical analysis (charts, graphs, and statistics) of the stock market.

Here’s a post in the Wall Street Journal with just a twinge of panic over the Hindenburg Omen.

The heroes over at ZeroHedge.com have been watching this development also.  (I recommend ZeroHedge as a daily read for investors. Some of the language is a bit salty, but Wall Street isn’t well known for its good manners.)

As a simple summary, the Hindenburg Omen shows when the market is divided.  The best analogy is that the Hindenburg Omen is like the  funnel cloud you see in the sky. It doesn’t mean a tornado will touch down, but it does mean you should prepare for the possibility.

A far more reliable indicator of the market starting to roll over (giving investors a chance to side-step a steep correction) is the distribution day analysis in the Investors Business Daily.  Searching this blog for “distribution” will give you a head start in the study.

UPDATE: Here’s a good revisitation by ZeroHedge of the Hindenburg Omen.

Written by heyercapital

August 24, 2010 at 6:07 am

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

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

Red light/ plan your picnic

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The character of the market this fall has been for the uptrend to fall under pressure, but inch up into newer highs. Once it makes new highs for the move, the rally – by definition – has resumed again. The sloppy action among the market leaders and the weight of the many distribution days has been too much and the market is now in a correction.

Remember, a ‘correction‘ can last a few days or a few months. Be patient. Read & research.  Build the watch list.

“Corrections”  don’t mean the market will plunge 60% in the next week. It’ll take six months. 🙂 Just kidding!   Given that IBD research has shown that 3/4 of stocks follow the general trend, it will likely be difficult to make headway in your stock or mutual fund investments against the downtrend.  I understand that sounds like I’m saying, “You’re going to get wet when it’s raining.”  Instead I’m encouraging you to plan your next picnic when it’s raining so you’re ready to go when it stops raining.

Written by heyercapital

October 28, 2009 at 7:58 am