Stockscores.com Perspectives
For the week ending October 13, 2000
In this week's issue:
- Commentary: Inflection Point
- Feature Strategy: Finding Stocks at an Inflection Point
- Tip of the Week: Canadian Symbols
- How to subscribe to the Stockscores.com Perspectives Daily Edition
***Stockscores.com Commentary***
Inflection point of the curve - the point at which a line tangent to the curve
has a slope of 0.
In the context of the stock market, this is the point where the market changes
direction, and psychology begins its shift from bullish to bearish, or bearish
to bullish.
On March 3, 2000, the market met its inflection point. The time when the market
would go no higher, the time when the curve changed from upward sloping to
downward, the beginning of the downward spiral that has taken us dramatically
lower over the span of a little better than six months.
Until this day, good news was good news, and bad news was good news. The
euphoric state of the market meant that little emphasis was placed on the
negative. The market wore rose-colored glasses.
Like a child who was sent to his room for bringing home an A on a Math test,
the market has punished performance ever since. For the past six months, bad
news has been bad news, and good news has been bad news. Companies that doubled
their earnings from last year and exceeded the market's expectations for their
growth were sent lower anyway.
I cite Friday as the beginning of the end of the dark clouded storm that has
hung over the market. Perhaps the child is to be let out of his room and
allowed to have some fun again.
Over the past week, the market moved lower and lower, but with more and more
volume each day. Complacency was overtaken by fear, and investors rushed for
the exit door en masse. Friday the 13th was just around the corner, and few
wanted to hold stocks any more.
But Friday did not turn out as everyone expected. Instead, the market opened
well and rallied strong through the day. High trading volume took stocks higher
as the sellers seemed to have collapsed from exhaustion and lost their will to
hit bids.
The market has hit its inflection point.
I think we have hit bottom, but don't expect a quick up trend that will take us
to Nasdaq 5000 again. A runaway train has to be slowed before it can be
stopped, and it will take time to reverse the pessimism that has gripped the
market for six months.
Expect a short and quick rally as bargain hunters try to snap up the
much-maligned names that they held in such favor last year. But those with fear
still in their hearts will sell in to this strength and try to ruin the party.
What will be important is that the markets form a rising bottom, a sign of
optimism, a sign of hope for the bulls.
A rising bottom forms a base for the market to build on; it is a stopping of
the train. A break from this rising bottom is what technical analysts look for
as a sign that the train is leaving the station in an opposite direction.
Markets very rarely form V bottoms, so be patient if you are looking for an up
trend to start tomorrow without pause.
In the meantime, I expect that this will be a stock pickers market. That means
that good stories will be rewarded again, although bad news will not be greeted
with rosy indifference.
The market has hit its inflection point, and fear will begin to subside.
Enough Said.
***Stockscores.com Feature Strategy ***
Want to find stocks that may be at their inflection point. This scan will find
stocks that have been beat up, but are showing signs that they have hit bottom.
These picks tend to be longer term holds that have less downside risk and a
good potential to change their downward trend.
First, we want to find the stocks that are beat up.
Set: Gain/Loss <= -20% over the last 60 Days (This will find stocks that have
gone down at least 20% over the past 60 days, since 21% is less than 20%)
Stocks that are bottoming tend to have an abnormal up day and trade abnormal
volume. Stockscores.com has tools that will find statistically significant
abnormal performance in these areas.
Set: Abnormal Activity = Abnormal Day Up
Set: Abnormal Volume = Abnormal Volume
We only want to look at stocks that closed above their open for the day.
Set: Candle = Bullish Candle
I prefer to stick to names that many people know and trade.
Set: $ Value Volume >= 5000000 ($5 million)
This week, this scan revealed 23 candidates. We want to look at the charts to
ensure that these stocks are showing strong performances after lengthy and
severe downtrends. The following are some good candidates for stocks finding
their inflection point.
ADAC
ALSC
CLRN
ELON
FTE
GEMS
GLC
ITXC
JCP
LDIG
NAVI
NICE
RHAT
SYXI
TEO
UPCOY
VRTA
WEBT
Take a look at this scan if you are looking for stocks that my be finding their
bottom and are ready to make a change in direction.
***Stockscores.com Site Tip of the Week***
There are some companies that trade on Canadian markets, but have a symbol that
is the same as a US listed stock. Because of this, we have to add a prefix to
Canadian listed symbols to differentiate them from their US counterparts. All
Canadian symbols must include a prefix.
For the TSE, use T.
For the CDNX, use V.
For the MSE, use M.
So, Nortel is entered T.NT for the Canadian listing, or NT for the New York
listing.
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