Ian Woodward's Investing Blog

I know you chuckle at some of my captions but they always have a message even though I hope most are amusing…that’s my fun.  Recall this one I gave you moons ago…well the rusty old car tells it all. Now it will have meaning to “newbie’s” who are trying to learn how to tell when an Index or stock is extended. 

Cautious comments regarding BIDU and the hot Tech Sector coupled with some member of the European Central Bank putting out hawkish comments seemingly caused the intraday decline, but at least there was an attempt at a bounce back in the last half hour.  Both AAPL and RIMM had a major sell off before the bounce to accompany the sell off on BIDU, and so most portfolios took a haircut.  I gave you the hint that one should watch the Nasdaq 100 in my Fly Me to the Moon blog on October 6, and I trust you did your homework.  I suggested that the target for the NDX was 2200 on the nose and it hit 2194…close enough for government work! 

Tomorrow will tell whether this was a one day knee jerk, or the start of a much needed pause to refresh, or yet again something more of a correction.  Time will tell, but act accordingly.  Best regards, Ian.

In working together on ideas for the October 27 to 29 Seminar, my associate Ron Brown and I came across a potential Wolf Pack for this week with Computer Software Diversified.  Later I spied another one in the same Industry and that is shown below as Computer Storage and Peripherals.  Three weeks ago I gave you a similar Wolf Pack, Internet Software on 09/22/2007, which was just getting started and it has delivered 12.80% since then.  Since many groups have flown into the sunset, these two below are just getting started and may provide opportunities for stocks that are not quite so extended.  Do your homework.  The top view is based on Percentage Change 3 weeks with the number of periods set to One Year.  Enjoy the Bull Rally while you can, but Watch the Fly Me to the Moon winky-winky of the NDX 100 as that Index is leading and getting extended. It is 23 points from the 2200 I set as a near term target.  Best regards, Ian.

We not only show you how to identify changing market trends, we give you suggestions on how to factor these trends into your investing style for capital preservation (market tops) and capital growth (market bottoms)…we show you how to connect the dots, so to speak, which Ron makes come alive as he does in his Weekly Movies. 

Hurry, Hurry, Hurry: Besides all this “good stuff” you will get to meet our associates George Roberts and Matt Sorrels who are the architects of the Software.  A few seats are still available.  For Information and to Register, please go to this site by clicking on the Go To sign at the top of this blog at www.highgrowthstock.com and select Seminars in the Table of Contents or try this to get there directly:  http://www.highgrowthstock.com/Seminars 

Best Regards, Ian.

Mail-bag Question:  Started a position in early August in GLNG. Great pick. Nice dividend in September and expect them to continue. The High Jump is saying “get out now”. I didn’t expect it go to so high so fast, so now it’s hold for the long term and expect the pull back, as opposed to sell now and buy back in later. And the answer is……….……….

Answer: Earl (on the High Growth Stock bb) gave you great advice and told you what he did which was to sell into today’s high.  Net-net, never let a great profit turn into a rotten one.  I also see that Robert gave you further insight going back to 2003 on the High Jump which I didn’t go back that far, and he suggested that you should consider placing a trailing stop below the prior day’s close, raising it each day until you stop out. Today’s low is 25.01. He usually uses 0.6% below so 24.86. 

Here is more fodder for you to chew on.  Here is the long answer…And the answer is never simple.  But if you have been reading my blog, take a problem like this and break it down three ways.  The Highest High to date from the 200-dma is 75.1725% up (I show you all four decimal places so that you can cast your beady eyes on 1/14/2004 and see the number).  (Editor’s Note!  A beady eyed customer caught an error…it is Jan 14, 2004 and not 11/14/2004…Thanks Steve and his wife).  So the 200-dma is currently at 16.0904.  Therefore the highest you can expect TO DATE is $28.19. The stock has produced a double top so far at $26.25, so you have $2 more to go between friends.  Let’s assume you were really lucky and bought this beast at $17.00, which would be a handy $9 or a gain of 53% on your investment right now, not counting the handsome dividend.

Note that the decision of whether to sell into the high of the day or let it ride for another day is bounded by Earl’s and Robert’s points to you.  Watching the action at 11.45 Pacific Coast Time on a 1 day 5-min chart shows a beautiful cup and handle and a desire to try to break through that top.  So read on and you can make up your mind according to the next hour’s action.

1. If you are conservative, one rule is to take 70% off and play with the remaining 30%, when a stock delivers >50%.  You will have taken your Capital off the table and will be playing with profits.  Let’s assume you invested $10,000…that has grown to $15,000, between friends.  So if you take 2/3rds off or 66.7% off that means you recouped your $10,000 capital outlay and have $5000 PROFIT to play with.   So decide how much profit you want to give up and act accordingly.
2. The bird in the hand is worth two in the bush.  As I write, it is trying one more time to get up to $26.25, and is currently sitting at $25.57.  It has also shown you that today’s support is at $25.25 so you can place a stop there and either take it all off or 70% off or do nothing.  If it can’t get through $26.25 then that may be all the ride you will get for now until it cools off a bit, so I have narrowed that decision down to giving up $1000 of your $5000 profit.
3. Bulls make money, Bears make money and Pigs get slaughtered…but that only happens after the event.  So you sit tight and ride it through for now to see if you can get to $28ish and at least you know when your stomach says I was a pig and “shoulda, coulda, woulda”.  Your ONLY reason for saying that is that Transport-Shipping is the hot area to be in and since Stocks are like wolves and hunt in packs, you will keep a beady eye on DRYS, and EXM and when you see those stocks and your own GLNG getting hit, it is time to kiss it good-bye.  All of these got trashed recently and of course they are going again, and more importantly are setting NEW record High Jumps.  The bottom line is that the Ian High Jump Indicator defines when a stock is extended based on its past history.  Always look back to the Highest Jump it has recorded as a guide.  If it breaks that highest level, the stock is into new high territory.  Confirm that others in the Wolf Pack are also doing the same thing, and that might give you a clue of how long to hold onto the stock.  If they are, there is a fighting chance the stock can go higher.  There also needs to be momentum in the Market and of course the Industry Group, which there is right now.  Decide how much profit you are prepared to give up and act accordingly.  Never let a great profit turn into a miserable one 

Editors Note:  All three stocks, GLNG, DRYS and EXM set up Cup and Handles today based on a 5-Min 1-Day chart. They all sold off early in the morning having made highs for the day and then formed cups and handles.  So the answer is…if you didn’t sell early into the high of today, hold for another day!  The lesson learnt is to always look for the action in leading stocks in the Wolf Pack.   Best regards, Ian.  

There are just four weeks left till there will be a “Gathering of the Clans” here in Sunny Palos Verdes for the October 27 to 29 HGSI Seminar, just 15 miles south of the LAX Airport and what better place to be than to taste a bit of my Blue Heaven?!  We look forward to seeing you all and there are still seats available if you are thinking of coming.  Sign up on the highgrowthstock.com web-site, and we appreciate your support.   A couple of notes back I said the shape of the Index Chart patterns suggested we were getting ready for the second leg of a High Tight Flag and it seems we are on that path right now.  You can tell when the High Growth Stocks are in fashion when our good friend Dave Steckler hits six out of ten so far this week in his 10% club…those stocks that give a pop for 10%.  You have to be nimble and take the money off the table, but its Blue Heaven when one can do that so often.  Likewise the list of 18 stocks has been percolating along since I mentioned them in the Gladiator Blog of September 5, 2007.  Those showing negative results had their day in the sun just a couple of weeks ago, so one has to be fairly nimble, though an overall 10% in 3 weeks is quite feasible.  Just use the filter in the September Newsletter and you will have winners these days. We are fast approaching the 4^th quarter, and as we well know the S&P 500 has been up 13 years out of the last 15 with an average gain of 6.3% and 7.2% over the last five years in the 4^th qtr.  The two negative years were 1994 and 2000, so we shall see what 2007 brings us.  That suggests we should be up a further 100 points between friends on the S&P 500 by year end.  This should take us to around 1630.  Best Regards, Ian.