ParkTwain's Parlor

[ParkTwain]

DDD continues to power ahead in a down market.

My present long positions: OXPS, DDD, QCOM, ANX. Trading account up 13.0% YTD 2006.

[ParkTwain]

Sold OXPS Fri. morning for close to a 20% gain. Checked in later in the day and was shocked to see how it had dropped. I sold after watching it struggle while approaching 30.00/sh. OXPS earnings annoucement is out 01/26.

Sold ANX Fri. morning at a 2% loss.

My present long positions: QCOM, DDD. Trading account up 12.7% YTD 2006.

[ParkTwain]

Generally useful, 4-page article about looking for and trading a breakout from a trading range:

http://www.trade2win.com/knowledge/articles/general_articles/range-breakouts-and-trading-tactics/

This article somewhat reiterates what I had posted earlier on this thread regarding watching a breakout for a regression back to, or below, the top of the establishing range (or previous resistance point). A reasonable approach is to establish perhaps one-half of your intended total position at the time of the breakout, then watch for any any retracement to the previous resistance point (which should eventually serve as support after the breakout occurs), then when the breakout trend is confirmed, follow through by entering the remainder of your intended total position.

As I have posted before, I believe you can anticipate with good accuracy when there is a better than even chance for a breakout to occur, by observing (1) a preceding upward trending in the stock's RSI plot before the pps reaches the pivot, and (2) a strongly diverging +DI and -DI plots in the Wilder DMX plot (see stockcharts.com).

[ParkTwain]

Bought small position this morning in RMIX. Good action today. All-time high and then some.

At end of session today, my trading account is up 15.7% YTD 2006. This includes an open position with >33% gain in DDD.

Also, the market liked OXPS's earnings news this morning. New ATH breakout on great volume.

[IIC]

Bought small position this morning in RMIX. Good action today. All-time high and then some.

At end of session today, my trading account is up 15.7% YTD 2006. This includes an open position with >33% gain in DDD.

Also, the market liked OXPS's earnings news this morning. New ATH breakout on great volume.

DDD...your pick of the year...nice...Doug(IIC)

[ParkTwain]

OH MAN! Look at BRCM tonight after hours!!!!!! OWWW, no position! OWWWW!

[ParkTwain]

All-time high watch: EYE and HMT

[ParkTwain]

I am considering attending this course here in Las Vegas given by Bright Trading's founders Bob and Don Bright.

http://www.stocktrading.com/training.html

Previously I have taken a free "Intro to Professional Stock Trading" that the Bright brothers offer through Community College of Southern Nevada. These guys are very savvy and experienced traders. They formed their own company to offer proprietary trading facilities here in Vegas and in many cities across the country.

For more about Bright Trading:

http://www.stocktrading.com/

[DSteckler]

I've been told by professionals in the biz (hedge fund managers, etc.) who know Don Bright that you'd be wasting your money. Don't know any of the details, however. I believe the idea is to get you to trade through his firm.

[ParkTwain]

Yes, I'm aware that both the night course and the 3-day are means to draw in new traders. I haven't bitten that apple and don't intend to. They are mostly into "pair trading" these days, something that has been common practice on the Street for 10 years. And Don Bright is not exactly the brains of that organization.

[Gatorman]

All-time high watch: EYE and HMT

HMT is very intriquing indeed and seems to be right in the mold of stocks you prefer. EYE, however, with an RS of 83 seems out of character for you.
I might pounce on HMT Monday myself.

[ParkTwain]

Well Gator, I would say you have to look at how old is the old high resistance point and how many times previously did the stock try to attack it and fail. You might need a higher RS to surpass that old high in some circumstances.

Second, Gator, also look at LMT's chart right now. And LMT has news as of today regarding a new $2B contract for military satellites.

Third, I haven't done my full complement of research for my next round of positions. Due to Friday's very long list of new 52-wk highs, more than the typical amount of time will be required to get that research caught up to date. And I expect to find many more candidates than were showing up late last year.

Fourth, I think the market is moving into a position that reflects the expectation of no further Fed rate increases as of some point in the near future.

Fifth, I see this as a real good time to be in the market. Look at Yahoo Finance's "Advances and Declines" page (http://finance.yahoo.com/advances) and you see that in Friday's session there were a total *893* new 52-wk highs and only *74* new 52-wk lows among the NYSE, AMEX, and NASDAQ listed issues. That's a greater than 10-to-1 ratio. Wonder why we don't hear that kind of information on CNBC.

[ParkTwain]

I was just doing a quick Google on "new highs to new lows" and luckily found this blog entry for January 23, 2006:

http://www.thinkequity.com/mt-archive/market_view/index.html

//
While we know that we won’t find the winners of tomorrow by reviewing the winners of the past, we think it’s instructive to analyze the characteristics of the top performing companies so to learn what to look for in identifying the “Stars of Tomorrow.”

To identify the All-Stars in the stock market, we evaluated over 10,000 companies to find which were the 25 top performing stocks from 1995 to 2005 on a total return basis. ... <table here> http://www.thinkequity.com/images-blog/012306-2.gif

In order to place our convictions in perspective, we conducted a study of the top performing companies over the past ten years, analyzing the company characteristics to highlight where growth companies come from and how they create value for shareholders. Notably, many of these companies exemplify the Megatrends that prevailed during the study period – a fact that we see as being far from coincidental.

In our study covering the best performing stocks of the past ten years, the average top-25 performing company had an initial market cap of $199 million in 1995; grew earnings 27% annually and experienced annual P/E multiple expansion of 6% - to yield annual price appreciation of 33% through 2005. At the end of the ten years, the average market capitalization of those same twenty-five companies had grown to $4.2 billion!

As this concise study highlights, profits are fundamental to a growth stock’s longer-term performance, and with a significant portion of the performance being contributed by P/E multiple expansion – despite relatively “high” multiples at the outset – there is a clear premium the market affords to companies that are able to consistently capitalize on their market’s rapid growth.

This “premium” of P/E multiple expansion that arises is what we believe differentiates a growth company from a growth stock, i.e., a premium company earns a premium valuation. By comparison, companies that rely upon the broader economy to help then achieve long-term growth will find it far more difficult to achieve a premium valuation in the absence of a strengthening economy, decelerating inflation and rising consumer and business sentiment.

Just to make sure that this 10 year period wasn’t a fluke, we went back to the 1985-1995 period to see which 25 stocks were top performers, and what were the characteristics.

Lo and behold, the median market cap for the top performing companies from 1985-1995 was even lower, $134 million. The median P/E was 17.6x and the average earnings growth was 31%. The class of ’95 had average CAGR of 32%. ... <table here> http://www.thinkequity.com/images-blog/012306-4.gif

After considering the profiles of the top-performing companies, it should be apparent that long-term stock performance is principally determined by earnings growth, not initial valuation, while the prevailing valuation is the result of proven operating success. The conclusion is that investors seeking to identify the top performing companies on these lists in the future should not focus on “bargain” stocks or even “momentum” ideas, but rather identify growth companies, competing in large addressable markets, that possess dynamic long-term growth potential. ...

Conclusion: 1) Focus on earnings growth – not the bargain basement. 2) Focus on small-cap stocks – size forges an anchor to earnings growth!
//

[DSteckler]

<< 2) Focus on small-cap stocks – size forges an anchor to earnings growth! >>

FWIW, many newsletter services are saying that large-caps should outperform this year. Personally I'm not so sure they're correct.

[Gatorman]

<< 2) Focus on small-cap stocks – size forges an anchor to earnings growth! >>

FWIW, many newsletter services are saying that large-caps should outperform this year. Personally I'm not so sure they're correct.

As memory serves, the so-called experts have been saying for the past 3 years that Large Caps would be taking over the market lead from Small Caps.
As Martin Pring says: " a trend is a trend until it isn't."
I'll stay with Small Caps for awhile.