– James F. Taulman, former Editor-in-Chief of the first independently licensed website to offer stock reports and services based on the CAN SLIM® investment system.
[dropcap]T[/dropcap]his latest rally has brought us a flurry of new breakouts. Throughout my 15 years of being in the business, I cannot recall seeing this many stocks breaking out at this rate and confirming BUY signals.
If you been working with me for the past several months – reading my reports, receiving my watch lists, you should be fully invested at this point, or at least have a good number of stocks in your portfolio.
As I mentioned in Friday’s Morning Market Update (sign up to receive those daily complimentary updates below) – We will continue not to predict and take things on a stock-by-stock basis. Generally speaking, stocks which break out with volume are BUYS, those that break down below our noted support areas are SELLS.
Here are the guidelines on how I update my trading criteria when a stock is added to my portfolio.
1st SUPPORT: is going to be the highs of the previous base, or the previous resistance. Remember, this is where you set your TRIGGER PRICE from originally. The break above that resistance was the BUY signal. As with any area of resistance – when it is taken out to the upside, then it becomes support in the event of a pullback.
2nd SUPPORT: is usually the 50-day moving average. The only time this will not be the case, is when there is some previous lows, above the 50 DMA. For instance, possibly the lows of the base. Regardless, the 50-day moving average is a formidable area of support that should always be respected.
MAX STOP LOSS: Using the formula shown in the diagram above you will set this criteria at -8% below your BUY PRICE. This is a guide, and I do not recommend setting a SELL STOP order with your broker for that price.
Here is our TrendLine Portfolio with noted support areas for each of our stocks.
TrendLine Portfolio – Trading Criteria Updated
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These 5 look the most poised to breakout…
BAC , ZION, and CMA – Three bank stocks with high ranks and solid fundamentals which are trading at new highs, yet are not at all extended from support of the 50-day moving average.”
FRI 2/3 – “Our latest Breakout Alert to confirm a BUY signal was DPZ on this past Tuesday.
Shares closed Thursday up +2.3% with more than double the stock’s normal daily volume.
That bullish action had the stock making IBD’s – “Stocks on the Move” table on the popular newspaper’s website homepage at investors.com.”
THU 1/26 – “We had another record 9 BreakOut Alerts yesterday. Plus, LFUS briefly traded above its TRIGGER PRICE of $157.07 at 3:42 PM, then it pulled back just before the close, so we did not send out an alert. This follows the record 7 BreakOut Alerts we had on Tuesday.
Of the 9 BreakOut Alerts we did release yesterday, we had 4 stocks from our watch lists confirm a clear BUY signal by default.
1) FLEX – As reported in the BreakOut Alert which I issued at 10:04 AM – “The volume is confirming a BUY signal. However, this is a pre-earnings breakout, and those carry more risk.”
MON 1/23 – “At this point, we are ready for another leg-up, and for the Dow to finally take out 20K. We shall see.
I did notice shares of SGMS setting up technically…
Still, the stock’s technical action is very appealing with shares looking poised to break out of a downtrend as there was some clear bullish action on Friday. The stock traded up that day from the 50-day moving average +3% with a +70% increase in volume.
I will be watching SGMS today for any trading 10 cents above the recent high of $16.10 with volume behind the move. That action would be buyable even considering the lagging-fundamental caveats.”
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