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INM Aug '09 - Odds Better While Still The Same Fundamental and Technical Rules Apply
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
Earnings are obviously a critical item we focus on, and many companies have been increasing their bottom line by taking a knife to costs. Trimming costs cannot increase profits forever. Eventually, companies have to bring in more revenue, or it is at least fair to say that companies really are not going to grow until they do.
That is why we also look carefully at the sales revenues comparisons when going about our business studying the high-ranked leaders showing up on our radar as possible buy candidates. It might be frustrating to spot the occasional high flier that runs way up in price, despite its lack of strong sales growth or spotty annual earnings history. There are good reasons for paying attention to the A criteria, and if was not important, the investment system would have been given a different name. Companies with erratic performance histories can be expected to be just that (erratic) in the future.
With this approach we are assured that we will find our fair share of winners, and we will also avoid a lot of pain. Not having seen any reviews of the new 4th edition of How To Make Money In Stocks (available since July) indicating otherwise, when it comes to the seven key criteria, I trust that they are still the same. You can sing it to yourself like Bob Seger's song, You're Still The Same. Maybe that could be used as a gimmick to keep yourself focused on one good investment strategy, especially if you've had trouble in the past with "moving game to game."
Three of four companies in the S&P 500 Index have reported results that topped analysts' expectations, according to Thomson Reuters, with about 300 of the 500 companies having reported. Maybe it is not very hard to over-deliver when everyone has been guided by the media and the investment community at large to believe the worst.
Investors have, in many cases, been putting money into areas that are expected to do well in a recovery. Long ago, many went scrambling for safe places in an economic downturn. Investors always have to battle the urge to speculate and "take a flier." Faith in our intelligent assessment of the facts and a disciplined approach explains the still rather slim selection of companies that we have been able to pro actively accumulate for Source's actively managed accounts.
Following this rules-based approach, we also look carefully at price/volume charts. It has been observed that the new 52-week highs list has expanded greatly in recent weeks. Yes, that news is encouraging! However, the fact that so many stocks were so low, for so long, has created a scenario where lots of stocks making new 52-week highs still are facing resistance due to a substantial amount of overhead supply.
Odds are favorable when advancers are outnumbering decliners as a general rule on the average trading day. So, the charts below illustrate a meaningful shift that has been helping investors have better odds since March. This is not an invitation to be reckless and haphazard in your buying efforts, but it does suggest that your chances of making more profitable trades are better than they were for many months prior.
PICTURED 1: The NYSE's Advance/Decline line illustrates the more favorable direction of the majority of stocks in the market since a long-term downward trend ended in March.
PICTURED 2: The Nasdaq's Advance/Decline line illustrates the more favorable direction of the majority of stocks in the market since a long-term downward trend ended in March. Its action, however, has leveled out in recent months while the NYSE's ongoing rise shows more encouraging strength on the Big Board.
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.