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Market Comment |
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The market demonstrated its willingness
to get back on track as the perennial October move got underway. The usual
September correction came a little late with a pullback towards the end
of the month. October is starting to follow the usual path, which should
lead to healthy gains in November and December. These are typically the
strongest months of the year.
The market has been congesting for
some time, building up the energy for a streaky move in one direction or
the other. Today's news on both the corporate and economic front was a
double whammy for the bears, and they were gored savagely by a new raging
bull as the NASDAQ made a new intraday high, reaching levels not seen since
March of 2002.
I read several technical newsletters
every morning. Even the most bearish technician was starting to concede
the market would be headed for higher levels. Most were seeing 1040 as
resistance for the S&P 500. A close above that level would certainly
lead the index higher according to the gurus. The S&P traded to a high
of 1048 today but hasn't closed above 1040 yet.
Yahoo! delivered earnings
and the stock jumped nearly 5 points, making a new 52 week high. The company
earned $65 million, or 10 cents a share, up 124 percent from $29 million,
or 5 cents, in the year-ago period. Once again, the performance of this
stock shores up my belief that PE Ratios mean nothing.
Maybe more importantly, the "jobless
recovery" is turning out to be not so jobless. The U.S. Labor Department
said initial jobless claims for the week ending Oct. 4 fell 23,000 to 382,000,
the lowest level since early February. The seasonally adjusted four-week
average of initial claims sank by 11,500 to 393,500. Great news on the
jobs front.
The market whipsawed investors today
with a significant pullback from the early highs. Nevertheless, it managed
solid gains, and closed strong near the end of the day. I believe the trendline
you see in red is important. We are back to
a recurring pattern of higher lows and higher highs. However, a pullback
to the trendline, which would fill the October 2nd gap could be in the
cards and would represent an outstanding buying opportunity.
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A
Tale Of Two Stocks |
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There was news from two of the stocks
I follow today. Neither news release was particularly robust, but a review
of both of these companies gives us the opportunity to compare and contrast
two divergent opportunities. A look a both of these situations brings up
the age old question- Is it better to buy stocks that are surging and making
new highs? or stocks that have pulled back and are camped on support lines?
Read and draw your own conclusions.
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VirTra
Systems (OTC BB: VTSI)- Company Featured on Cover of Trade Magazine |
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In the case of VirTra Systems,
both the company and the stock are gaining momentum. The huge volume surge
in the stock in September was precipitated by the company's announcement
of the first sale of its new 360° situational awareness and judgmental
use-of-force virtual reality training simulator. The first order was placed
by a foreign governmental security agency, with a promise for an order
for 10 more units early next year.
On this news, the stock surged to
a new multi year high of $.29, up from the $.10 level where I first featured
the company in the July
15th edition. The stock has since hovered in the $.23 to $.25 range,
netting about 150% from July's entry level.
As further evidence the company continues
gaining momentum, I learned today that the IVR-360™ will be featured on
the November/December issue of the law enforcement trade journal "The
Police Marksman". If there is an online version, I will definitely
get a link to the cover picture and accompanying article.
Having your product on the cover
of an industry publication is the kind of advertising you can't pay for,
and suggests the company's status is rapidly growing amongst its peers.
The stock is perking up again. A
break above $.29 would establish another new high, and certainly bring
the $.30 mark into focus as a future support level.
This stock averages 400,000 shares
per day. This is a four fold increase over the average daily volume back
in mid July when I first featured the company. It appears huge volume is
not required to send this stock to higher ground. If you like stocks making
new highs, this one's for you.
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Amnis
Systems (OTC BB: AMNM) Gets Rave Review From Customer |
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If you are in the "buy low, sell
high" camp, Amnis is a stock worth looking at right now. Like VirTra
Systems, the company definitely has fundamental momentum. I expect
the September quarterly results to demonstrate significant gains over the
June quarter.
Unlike VirTra Systems, Amnis
is not making new highs. In fact, the stock recently made a new low since
first covering the company in the June
3rd edition. We started with this one at $.07. I originally stated
I felt the stock could rebound to $.15, and the stock made me look like
I knew what I was doing for the first month. It obliged by touching off
of $.15 briefly, and has since been trending down.
This afternoon, Amnis announced
Marshall
Communications had purchased the new OptiVideo Server system.
Click
Here to read the press release. When this new product line was announced
at the end of last month, the stock traded 20 million shares in one day.
Amnis has a considerably larger
audience than VirTra Systems, as the average daily volume runs about
1.5 million shares. However, in the case of Amnis there appears
to be some excess supply of stock hitting the market, no doubt as a result
of the recent capital raising events. The supply of stock should be finite,
and once it is absorbed by the market the stock could head for higher ground.
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Conclusion |
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So, which stock is the better buy
today? The stock that is trading near the high end of its trading range,
or the one that has pulled back and gotten cheap. If you're looking for
the answer, I don't have it. It will be interesting to look back in a month
as see which stock performed better. I suspect it will be the one that
reports the most compelling fundamental developments.
This question goes to the whole concept
of developing an investing style that works for you. Some people like to
buy stocks that are oversold. I believe that strategy is less risky, but
requires a longer term outlook.
Others like to buy stocks that are
moving up and making new highs. I believe that is a riskier strategy, but
can work better in the short term.
In either case, find a style that
works for you and stick to it.
More on understanding your own psychological
investment profile in future editions.
Charts Provided Courtesy
Of TradePortal.com |
