One New Speculative Long Position And One Stock I Am Adding To My Existing Long Position; Bull Market Appears To Be Near An End

November 7, 2007

The time to make big money in longs has passed. There are a lot more short candidates that are setting up in better short patterns than there are long candidates setting up in great long patterns. It appears the tide has finally changed. Granted most indexes are still in a very strong uptrend but all the new long candidates have recently been shit and after today’s action in the indexes it is time to say so long to the big money on the long side. If FNDT can not follow-through today with that near-perfect chart then it definitely is not time to be loading up on longs anymore. It is so disappointing how few perfect charts appeared this year. But what is even worse is that when the near-perfect ones show up only a few work (APPY is the only one recently). DGC and XPL are both too thin and speculative for new investors and experienced investors should keep them small as the market has turned in favor of the bears, even though we are still close to new highs. The extremely horrible breadth, the large amount of stocks hitting 52-week lows, and the amount of large cap stocks breaking down (C MER GS LM WM etc…) are all clear signs that the market is nearing an end to its bull run. This isn’t the August 29th follow-through anymore, Toto!!

new speculative long position: XPL

XPL is breaking out of a cup with high handle pattern, on above average volume. This is not the greatest chart out there by far but the speculative mining-gold stocks have been doing well and this stock’s chart does have max green BOP the past three weeks. So it is worth a small poke. The chart has only recently become pretty as a very heavy accumulation day in August helped turn the BOP max green for a little while even with the stock pulling back afterwards. In October the stock seemed to find its legs and steadily trended higher with one day of huge accumulation and max green BOP. The handle was very quiet with very bullish reversals and trading sessions in the price data. The breakout today comes with a slight surge in volume and with BOP remaining max green which is a very rare occurrence recently. The other noticeably bullish development is that the RS line is leading the price to new high ground by quite a margin–that is very bullish. Sadly the fundamentals suck (EPS is a lowly 25 to give you a hint how bad it is) and the stock trades under 17k a day, making it too risky to be a long in any newbie investor/trader’s portfolio. But if experienced investors want to try to make some money this is a good chart in this really bad market environment. Just make sure you use a limit order and that you keep the position very small and just for fun. Cut your first loss with a close below the 5.60 level and your final loss with a close below the 5.35 level, if the stock does not move higher immediately.

adding to existing speculative long position: DGC

DGC is breaking out of a short continuation consolidation pattern on top of the nice big cup base, on strong volume. This is one of the few very pretty charts out there with green to max green BOP all over it going back to early April. The extremely strong accumulation with virtually no selling is visible on the chart during that same time frame. The green to max green BOP, huge accumulation, and great candlestick daily price action just makes this a very pretty chart. The RS line is also hitting a new high well ahead of price showing you the strength of the stock in this rough market. The most noticeable problem with the chart is that all that max green BOP has deteriorated the past few days and now the stock no longer possesses this beautiful feature. So that is a knock against it. The fundamentals are not good at all and just a quick look at the EPS being 28 pretty much sums it up. But this is not a great long not only for the poor fundamentals but also because the stock has a very low average daily volume (23.7k a day). Therefore, this is not a good long for newbie investors/traders and experienced investors should definitely use a limit order if you must be long a pretty chart in this rough market environment. Cut your first loss with a close below the 5.25 level and your final loss with a close below the 4.90 level, if the stock does not move higher immediately.