Heyer Capital, LLC

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

Archive for the ‘stock ideas’ 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

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

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

market trend line

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The general market (summarized here with the S&P500 ETF) has had a powerful up trend the past eight months. A peculiarity of it is the major trendline connecting the price action in March, July and early October.  To make it to new high ground (toward “Point A“), the market will have to pass through not only the natural doubting resistance of new highs but also up through the strong trendline.

 

S&P5 chart trend 6 3

Failure to press through toward “Point A” possibly sets us up for a head and shoulders reversal.

Written by heyercapital

November 6, 2009 at 4:25 pm

Posted in stock ideas

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

Resuming an uptrend

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Despite the relatively high number of days of institutional selling (signified by stock indexes down in price on higher volume) we should recognize that the market’s uptrend has resumed.

The bears have lots of reasons, but no one can argue with the tape (for too long, anyway.)

UPDATE: the sentence above seemed cryptic upon re-reading, so premit me to elaborate a bit.  We’re still facing several days of distribution in the past few weeks, so it wouldn’t take but a day or two of terrible action to again raise the “Yellow-Caution” flag on the market.   The DeMark indicators – a technical voodoo I don’t follow too closely – still shows meaningful ‘tops’ are in place for the S&P500 as well as some foreign currencies.  The English (& loose) translation is that any “Green light” means proceed with caution.

UPDATE: Oct. 28:  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.

Written by heyercapital

October 15, 2009 at 1:11 pm

Posted in stock ideas

Follow up on the Follow Through Day

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One of the defining characteristics of a Follow Through Day is the strength of leadership shown by quality growth stocks.  You want to see solid companies leaping ahead of the market, advancing on higher volume.

Ryan Krueger of Krueger & Catalano Capital Partners posts that out of the top 25 performers last week out of the entire S&P 500, how many were non-financials above $10 per share?   Exactly zero.

Written by heyercapital

March 16, 2009 at 1:40 pm