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I was up at 5:30AM Pacific on Friday
morning. I couldn't sleep, so I got to work. I turned on CNBC, and
the rhetoric was predictable. I watched for about two hours as the network
went through its usual gyrations of interviewing fund managers, floor traders,
and general know-it-alls. Art Cashin, widely acknowledged one of
the true old time characters and cagiest traders on the floor of the NYSE,
said in his usual tongue-in-cheek manner: "Goldilocks is buckled
in with two seat belts and a helmet". Goldilocks is the
pet name for the current slow but steady low growth, low inflation economy,
which is ideal for stocks.
In the first two hours of coverage,
couldn't find one individual to say anything positive about the market.
All the major indexes have been in a free fall this week, and as I said,
the rhetoric was predictable. Stocks in all sectors have been getting clobbered.
Call it instinct, experience, seat
of the pants analysis, whatever. When I hear this much negative sentiment
on CNBC, I start doing some bottom fishing. I believe when the rhetoric
is this negative, the bottom is near at hand. I could be wrong. There's
lots of negative stuff going on out there. However, take a look at the
chart. There have been two similar sell offs this year, and both turned
out to be outstanding buying opportunities. Will history repeat itself?
We'll see. Personally, I like our chances.
Thursday was a critical day. Ben
Bernake, the market's new "put" against the downside, testified the
could be done lowering interest rates. He thinks their work could be done
for this year, depending on the data. Of course, the market interpreted
this to mean that between collapsing housing prices and higher oil prices,
the consumer ain't going shopping this holiday season- dead consumer equals
dead economy- equals dead stock market. This sent traders into a second
selling frenzy for the week. What I call a "cash at any cost" mentality.
In light of the drubbing in the markets
this week, I want to write a little about my SSLs- Suggested
Stop Losses. Whenever I cover companies, I generally post an SSL-
suggested stop loss, on the left hand menu bar at the home page.
Using the SSLs is a very personal
decision. They are not for everyone. Here's how I advise you to use the
If you are an active trader- someone who likes to trade in and out of positions
on a daily, weekly, or even monthly basis, you must use the SSLs.
You must preserve your capital against major losses. As you know, it can
happen, especially in microcap stocks. Sometimes it's the market- sometimes
the company- sometimes both. Nevertheless, you need to live to fight another
You might not like my SSLs-
you might choose your own. You might use them for some positions that you
view as a trade- for other positions you might want to be long term. The
choice is yours.
Here's one psychological acknowledgment
you need to make- if you continue to hold a stock below the stop loss level,
whether it's your chosen level or mine, you have decided to become
a long term investor, and shouldn't be concerned with trading levels
in the short term.
In light of the massive sell off
in the markets, I am updating the SSLs on the home page for you
to use should you choose to do so. You can never tell where the bottom
is, but bull markets can be characterized by swift, brutal sell offs, and
this past week could have been one of those corrective phases which could
be close to running its course.
A couple of OTC Journal featured
microcaps traded quite well today despite the brutal sell off- SPKL,
TTGL, and TCGD all had pretty good days in light of the free
fall. This leads me to believe individual investors are not buying into
the death of the market.
In case you don't believe in my Fibonacci
Retracements, check out the current chart of SPKL. I don't know
why, but I seem to be able to call this stock really well. Here's a chart
with the whole move from $.50 to $2 in Sept/Oct. In the BLOG,
I have been suggesting the stock could sell off to the 61.8% retracement
level of about $1.10.
Sure enough, like a trained hunting
dog retrieving a bird, this stock went straight to within a couple cents
of its pre determined destination, and turned right around and headed for
home- back up. The low print of the week was $1.09 on Thursday,
and it turned right around and headed back up. It closed at $1.35
Friday. Big rebound.
I got a bunch of calls from friends
who had all made money on the stock, wondering if it was time to jump back
in. I can't be certain we saw a bottom at $1.09, but it seems likely
to me. I can't predict where this stock will be in one to two months, but
I believe it will be $3 to $5 in one to two years. There's
a lot going on, and it's all very positive.
If you're looking for to jump into
something that has done beautifully for us while there's blood in the streets,
consider Apple Computer (NASDAQ: AAPL). I've been recommending the
stock since it was $93 in March.
AAPL has given back 38.2%
its Fall move, which should represent the first level of resistance. Last
quarter the company literally blew away analysts' estimates and delivered
billion in profits on $7 billion in sales. MAC sales
are being fueled by iPhone and iPod sales, and iTV
should be big this holiday season and into next year. The new Leopard operating
system is being delivered, and it plays well with Windows Vista.
However- here's the other side of
the story. If you believe the American consumer is going to hide in the
closet for the foreseeable future, AAPL should be avoided. iPod,
iPhone, and MAC sales will all disappoint. Guess what- I don't
think it's going to happen.
I still believe the stock is going
to $225, but I can't say when. I thought we might see the $200
threshold this year, but who knows at this point. However, I am a buyer
of AAPL to some degree in some form on Monday- perhaps through a
Call option which will limit my downside risk to the amount I invest, but
could yield on heck of a return on a multi point move to the upside. Check
the AAPL Blog on Monday morning.
Like Goldilocks, it's time
to buckle up with two seat belts, put a helmet on, and put some money to
work before there's two hours of coverage on CNBC telling you it's
all right to buy stocks again. By then, it will be too late to steal some
in the BLOG
There is a long awaited update BLOG
posted on beleaguered and disappointing Bad Toys/Palladin/Southland
Health Services. I spoke with CEO Larry Lunan on Friday, and
the report was not encouraging. However, all hope is not lost. Read the
current BLOG for the 411.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at email@example.com.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG scrolls down from the upper right hand corner. The most
current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.