So the stocks studied so far make up the stocks that were up 500% + in a year as of 1/10/2011. I figure this is a good time to point out some of the common traits from a fundamental stand point and the basic characteristics of the stocks. Later this week I will look at the various chart characteristics but for now here's the non-technical points:
1. Each stock was an IPO in the 90's.
2. Each stock was below 100M float.
3. The average volume ranged from 21k to 3.7M. Two of the stocks averaged below 100k daily.
4. Three of the five stocks had a Sector RS of 84 or higher. Sector seemed to have some effect.
5. IBD Composite ratings were all 65+, mostly due to high RS ratings. EPS ratings were no higher than 80 and as low as 12.
6. Fund buying trend for four of the five stocks was up during the run. This appears to be important to the stock's momentum upward and occurs during the biggest moves.
7. The fundamental ratios didn't matter at all - they were all over the place.
8. Earnings and sales growth - two of the five stocks had explosive earnings and sales growth with acceleration, RDCM and LGL. CPWM was a retailer - driven by same store sales, and had good sales for three straight quarters and had 232 eps growth in the holiday quarter. Issue here is that RDCM and LGL were the two stocks with below 100k average volume. But overall earnings/sales growth appeared to matter to a degree.
9. That being said, two of the stocks had future prospect catalysts - one an energy resource company with no revenue and a biotech with its main hope on a drug trial. For those the current earnings/sales did not matter.
On that point, my next post will address the technicals and news catalysts, including looks at the breakouts and bases. Hopefully by Monday/Tuesday I will have that posted.
Let me know if you have any additional observations as always.
January 29, 2011
Stock #5 LGL – L G L Group Inc. - 1-year gain 500% (1/10/11)
Stock #5 LGL – L G L Group Inc.
Machinery – Gen Industrial
LGL is a company in the network infrastructure component business – it has large company customers such as Cisco, Erricson, Raytheon, Honeywell, and others.
The company was around in the 90’s for the internet bubble. The stock declined from a top in 1998 to a low of exactly $1 a share in late 2008. It spent the next few months forming a base and broke out of its bottom, going from $2 to $4 in about three weeks to start of its recovery. Much like the other stocks, this one was in decline for many years and broke out with the bear market bottom in early 2009. Also like the other stocks, after it bottomed it formed a long base to act as a springboard for a big move.
In mid 2009 LGL began forming what would be a 11-month cup with handle base, with the handle forming in February and March 2010. The breakout of this pattern on high volume on an earnings report was all it took to stir the tanks for this rocket. It yielded 7 breakouts including the c&h breakout. Not all were perfect but there were chances to trade this one. I have noted the bases, breakouts, and any breakout catalysts on the chart.
First the charts, then the other stuff.
Stock is very low float: 1 million shares. Average daily volume 21k.
Sector RS = 84. Other stocks in group did well: SHS RBN AIMC DXPE.
IBD Ratings: Comp 91; RS 99; EPS 80
Fund trend: UP – Funds 14, 15, 18, 18 in March-Dec 2010. You can see the fund buying in September on the chart in the increase in volume and dollar volume.
Stock’s PE and PB were 10 and 6, and D/E was 7%.
EPS Growth was triple digits as the company went from loser to growth stock. Growth was 400/-8, 202/42, 326/73, and 305/69 in the Dec ’09 – Sept ’10 eps reports. Earnings mattered. Earnings for 2010 and 2011 was projected to grow 384% and 24%.
So why did this stock go up 500% in a year? Easy to see - this stock had neglect + explosive earnings growth + low float...and that turned into momentum under fund buying pressure. Who says earnings don't matter huh?
Machinery – Gen Industrial
LGL is a company in the network infrastructure component business – it has large company customers such as Cisco, Erricson, Raytheon, Honeywell, and others.
The company was around in the 90’s for the internet bubble. The stock declined from a top in 1998 to a low of exactly $1 a share in late 2008. It spent the next few months forming a base and broke out of its bottom, going from $2 to $4 in about three weeks to start of its recovery. Much like the other stocks, this one was in decline for many years and broke out with the bear market bottom in early 2009. Also like the other stocks, after it bottomed it formed a long base to act as a springboard for a big move.
In mid 2009 LGL began forming what would be a 11-month cup with handle base, with the handle forming in February and March 2010. The breakout of this pattern on high volume on an earnings report was all it took to stir the tanks for this rocket. It yielded 7 breakouts including the c&h breakout. Not all were perfect but there were chances to trade this one. I have noted the bases, breakouts, and any breakout catalysts on the chart.
First the charts, then the other stuff.
Stock is very low float: 1 million shares. Average daily volume 21k.
Sector RS = 84. Other stocks in group did well: SHS RBN AIMC DXPE.
IBD Ratings: Comp 91; RS 99; EPS 80
Fund trend: UP – Funds 14, 15, 18, 18 in March-Dec 2010. You can see the fund buying in September on the chart in the increase in volume and dollar volume.
Stock’s PE and PB were 10 and 6, and D/E was 7%.
EPS Growth was triple digits as the company went from loser to growth stock. Growth was 400/-8, 202/42, 326/73, and 305/69 in the Dec ’09 – Sept ’10 eps reports. Earnings mattered. Earnings for 2010 and 2011 was projected to grow 384% and 24%.
So why did this stock go up 500% in a year? Easy to see - this stock had neglect + explosive earnings growth + low float...and that turned into momentum under fund buying pressure. Who says earnings don't matter huh?
January 28, 2011
Chart Porn
While I am working, here are the weekly charts from the first 4 stocks. Tell me what you see - there are no wrong answers.
January 27, 2011
Ignore that man behind the curtain...
I am working on a spreadsheet to try to organize the "data" a little better for analysis. Fitting it in while trading and dealing with sick family members has proven a challenge.
I am also reading Monster Stocks by John Boik presently...and a lot of that book so far relates directly to what I am trying to do here. Stockbee members should read the review of that book on the stockbee site...search for monster stocks.
To get your suspense up, the next stock I'll be looking at will be LGL. It was up 500% in a year as of 1/8/11.
Anyone out there with good ideas for easily posting charts with notes on them to the blog let me know please...Telechart doesn't seem to have the option to save an image of the chart and paste it in here.
I appreciate your patience while I fine tune things a bit in midstream. I am learning to do this so some adjustments aren't seen as necessary until you start.
Happy Trading...don't forget to sell ;)
I am also reading Monster Stocks by John Boik presently...and a lot of that book so far relates directly to what I am trying to do here. Stockbee members should read the review of that book on the stockbee site...search for monster stocks.
To get your suspense up, the next stock I'll be looking at will be LGL. It was up 500% in a year as of 1/8/11.
Anyone out there with good ideas for easily posting charts with notes on them to the blog let me know please...Telechart doesn't seem to have the option to save an image of the chart and paste it in here.
I appreciate your patience while I fine tune things a bit in midstream. I am learning to do this so some adjustments aren't seen as necessary until you start.
Happy Trading...don't forget to sell ;)
January 23, 2011
Stock #4 - AMRN - Amarin Corp - 1-year gain = 557% (1/10/11)
Stock #4 - AMRN – Amarin Corp – Medical – Ethical Drugs
- The stock had 3 EP days in November 2010 that ultimately took the stock from $3 to $9.66. Both days were breakouts:
o 11/10/2010 – The stock had formed a tightening, low volume downward drifting range near recent highs for about 2 weeks and rested on its 50-day moving average going into this breakout on an EP day. The news catalyst was that the company was announcing its Phase 3 results for AMR101 in 2010, instead of 2011. The stock rose 9% on high volume. The stock rallied from $3 to $3.80 in 5 days before forming a tight downward drifting range for about 7 days, coming to rest at $3.50 area.
o 11/29/2010 – The Company announced positive Phase 3 results for AMR101 and the stock gaps up on a big white candle. The breakout was on around $240M dollar volume. Stock opened up 49% and finished the day up 65%. As can happen after gap moves like this the stock went sideways in the breakout day range for about 10 days.
o 12/15/2010 – On no news, the stock rose 6% (after being up over 12% intraday). This breakout was on much lower volume than the previous breakout, but the stock still managed to rally 32% in about 4 days before drifting upward to 52-week highs in light action. The stock stalled after a total rally of 63% from this breakout.
o 1/6/2011 – The stock tried to break out again, and it rallied 10% to new highs at 9.66 on decent volume. But the breakout retraced itself the following week.
Why did AMRN go up 200% plus in a year?
1. This stock has neglect from a chart perspective before making the bulk of its move. The stock bottomed under $1 in early 2009, just like every other stock so far. After rallying off the lows it formed a one-year base and broke out to start its uptrend in early 2010.
2. Another part of neglect – fund ownership – wasn’t as bad for this stock as the other stocks so far. Funds owning the stock were 12 (3/2010), 18 (6/2010), 23 (9/2010), and 42 (12/2010). So there was some fund ownership there. But notice the jump in funds between March and September; it doubled. This coincided with a 300% rally in the stock from $1 to $3 in 6 months.
3. Earnings growth and fundamentals don’t appear to have mattered in this case; the company has many years of losses and projects a loss in 2011. IBD earnings rating is 48 in January 2011.
4. This stock had float of 60 million. So far each stock studied was under 100 million.
5. Each stock analyzed so far has been low priced at the beginning of its move and made it through the $4-$6 range during the big leg of the move. AMRN did the same, going from $3 to $9.66 in 2 months. Just before that move, the stock broke out of its year-long base, based again for 6 months, then tripled. This pattern of bottoming in neglect, breaking out, basing for a long time (months), and then breaking out for a large move seems to be consistent so far.
6. The stock’s IBD sector rating is 49. But this sector is different from others; usually company specific news related to testing of drugs, drug patents, regulatory approvals, etc. But other stocks in the ethical drugs group had good relative strength: JAZZ, QCOR, VRX to name a few.
7. There was definitely a news catalyst for AMRN. The AMR101 cardiovascular drug testing news releases directly coincide with the rally. This drug is their lead candidate for the future and has had a high positive news flow.
Personally I try not to trade these stocks dependent on drug trials, biotech and such. Unless you are a cardiovascular expert I’m not sure how one could predict drug trial results. Many of those announcements result in big gaps, like this stock had in November. This stock’s big move appears mostly based on news catalyst. But neglect was the main common factor among this stock and the other big gainers so far.
Other notes:
- The company’s focus is on cardiovascular disease. Its leading candidate is a drug called AMR101, which is designed to reduce triglycerides. Phase 3 positive results were announced in November 2010 with the stock near $3.50 a share. The stock expects more news on trials in Q2 2011.
- The stock’s IBD rating was 75 just after the Dec 2010 move. This was mainly due to a spike in its RS rating.
- The stock declined for about 2 years from early 2007 to early 2009 before the very bottom of its move. It then rallied hard off the bottom in early 2009, but needed another year of downward drifting range action before breaking out in the first half of 2010 through the $2 area.
- Short interest spiked in November and some reports stated that the short squeeze was on in December. Shorts are now 8% of float (12/31/2010). Down slightly from just after the breakout in Nov 2010.
- The stock IPO in 1993.
- The stock had 3 EP days in November 2010 that ultimately took the stock from $3 to $9.66. Both days were breakouts:
o 11/10/2010 – The stock had formed a tightening, low volume downward drifting range near recent highs for about 2 weeks and rested on its 50-day moving average going into this breakout on an EP day. The news catalyst was that the company was announcing its Phase 3 results for AMR101 in 2010, instead of 2011. The stock rose 9% on high volume. The stock rallied from $3 to $3.80 in 5 days before forming a tight downward drifting range for about 7 days, coming to rest at $3.50 area.
o 11/29/2010 – The Company announced positive Phase 3 results for AMR101 and the stock gaps up on a big white candle. The breakout was on around $240M dollar volume. Stock opened up 49% and finished the day up 65%. As can happen after gap moves like this the stock went sideways in the breakout day range for about 10 days.
o 12/15/2010 – On no news, the stock rose 6% (after being up over 12% intraday). This breakout was on much lower volume than the previous breakout, but the stock still managed to rally 32% in about 4 days before drifting upward to 52-week highs in light action. The stock stalled after a total rally of 63% from this breakout.
o 1/6/2011 – The stock tried to break out again, and it rallied 10% to new highs at 9.66 on decent volume. But the breakout retraced itself the following week.
- The breakouts were fairly clean on this stock, but the large gap day would have been tough to enter on a 49% opening gap. But break through highs after pullback provided decent breakouts in mid December and January that stalled the move for now.
- The bases were in tight downward drifting price action, very orderly during the bulk of the large move.
- The stock’s trend intensity throughout the move was:
o April 2010 (before/after breakout): 127/129
o November 2010 (before/after breakouts): 106/127
o December 2010 (before/after breakout): 165/163
o January 2010 (before/after breakout): 172/171
- Note that the 300% part of the move started when the stock was at 106 TI. Subsequent breakouts were pretty high trend intensity both before and after the breakout.
As usual, any comments welcome.
Subscribe to:
Posts (Atom)