Wednesday, February 1, 2012

Let Your Stocks Talk

It was 62 degrees here today. While this is great in February, I think Spring just got pushed back by two weeks as Winter will want it's due.

No, I am not going to discuss the Facebook IPO.

Let Your Stocks Talk
I would think that even the most blissfully long mega bulls would concede that the rally that started in mid December is getting a bit long in the tooth. I know I made the commitment to be aware of where markets are in an overbought/oversold cycle when opening positions in 2012.

Up to today overbought has been worked off by some smaller dips and sideways movement. Constructive and it allows set ups to recharge. It's great to see but textbook behavior can make me feel uneasy after a while. Instead of over thinking things, I will let the stocks I buy do the talking by observing the price and volume action as we go forward. Surely they will know more than I will and know it first, yes?

I made two buys yesterday afternoon and one this morning. The 3 are about as different as you can get, and thus I have a broad look at the market via the positions I have. I did this by design to have a few different looks as things progress. Click any chart for larger view.

A small cap oil and gas exploration company. IBC's chessNwine had been working on it and I liked the steady uptrend and was playing for the break over $34. It held over that level today.

A small cap water industrial manufacturer. Very tight base and while I drew the base excluding the lower end, I was most interested in the range provided by the candle on 11/30/11 topping out at $38.50. Played for a close over that and it did so today.

A super small cap savings and loan. $20 has been an a tough level to crack. When you back this thing out to a weekly view (FinViz) you can see the room to run should this little number ever get moving:

So I have exposure to small cap energy, small cap industrial niche manufacturing, and a super small cap financial. AREX has a solid uptrend in place and has just negotiated past resistance. WTS has built a long term base and has closed over former resistance going back to November 2011. Should the market be looking at a "dip" and not a correction I would expect these two names to retest the resistance and be able to hold it as support. If not, then maybe a more forceful correction is a hand. To be fair, neither is so far past resistance that a small dip under it rules them out going forward.

BANR is the most hyper of the three in that it will most certainly require a broad based market run up to continue a power move past the $20 range. I would think this name would be the first to turn back in the face of any broad market weakness, especially in the financials which have been leading the charge.

You will always pay more attention to market action when you have skin in the game. You are least likely to allow bias or hope to mess with your head if you stick to your targets and stops on open positions. I like this set of three to give me a feel for the tape going into weeks end and I will let them do the talking. All I have to do is listen.

Here is an updated chart of MSEX which I highlighted in Monday's post. Has broken the triangle to the upside. It's a really small name so be aware if you are considering it please!:

Have a good night.


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If stocks could talk what would they say.