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Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (1705)	8/5/2005 12:27:51 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 4814

LOL! I don't even know what WFMI stands for, much less what they do! I am sure there are reasons for WFMI's success. I'm not trying to blow you off here, especially since there are times when I do a fair amount of FA, but what you or I might think about those reasons is not very relevant. What we really want to know is what the market thinks of them, and if that's likely to continue or change. And it doesn't really matter if the market is "right" or "wrong." In fact, I think it is better to assume that the market is always right. Anyhow, it is very clear that the market resoundingly approves of those reasons, and the chart is screaming that: 139.142.147.19 139.142.147.19 I did note that WFMI has beaten earnings estimates 5 of the last 7 quarters (keep this in mind for next quarter!!!!). And also, that since the beginning of 2000, revenues are growing very nicely by about 20 - 25% year/year every quarter. This speaks to very sound management, planning, and marketing---just general good business saavy, which the market usually likes to see. So where to now? Well, for the vast majority of stocks, a candle completely outside the BBs is a very unstable situation, and that is usually quickly resolved by the stock moving quickly back inside the BBs any which way it can. This is what we saw with SSTI back in June: stockcharts.com[w,a]daclyyay[dc][pb20!d20,2][vc60][iLg!Lk14]&pref=G Aand this is what is happening now with WFMI. We can expect that to continue, so in the next few sessions, WFMI will be moving sideways or down, until it encounters support. The first support level will be gap support at $132. Because WFMI has gotten so far ahead of itself, and because the market mood is rapidly turning bearish, I think that support will not hold (that was also the case with SSTI). Alternatively, WFMI may slide sideways, but either way I don't think it will move higher until the real test of support, which is the 20 sma, which is hurrying upwards to catch up with WFMI: stockcharts.com[w,a]daclyyay[dc][pb20!a132][vc60][iLg!Lk14]&pref=G That represents the middle of the BBs as well, so that is pretty solid support and should hold, particularly considering the fact that WFMI is steadily getting stronger. Stocks like that spend most of the time moving between the upper BB rail and the middle of the BBs. So, if I were trading WFMI, I would have a very tight stop or would just sell right here. Then, re-evaluate as the stock approaches the 20 sma. I would not buy it unless and until it could correct back at least to the 20 sma. Now, I am talking about a trading strategy here. But obviously, WFMI could be bought for a medium-term or long-term investment as well. In that case, I don't think it matters much what price you buy it. If I were accumulating for a medium term or long term investment, I'd probably start right here, and just buy more as WFMI trades down. The more it trades down, the more I would buy (increasing the dollar amount each time, that is). That is sort of a leveraged dollar cost averaging strategy. I rarely do something like that, but with a stock like WFMI this makes sense to me because the downside risk is very reasonable, and the upside potential over time is excellent. I would also re-visit this stock in 3 months for a possible earnings-related trade. If it ramps up going into earnings (especially on increasing volume), I'd leave it alone because the risk of "buy the rumor, sell the news" would be high. But if it is trading normally or flat (or even better, down) going into earnings, this would make a pretty good earnings play. Worst case scenario here is that you are wrong, and WFMI doesn't beat the street. But an earnings miss is very unlikely judging from WFMI's history, so you'd just end up owning shares of a very strong stock and could just be patient and wait, with low downside risk. T