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Wednesday, December 16, 2009

Setup

OK so now that my Fantasy Football season is over, I can turn more attention to stocks.

Because the chance to play the stock market is never over.

So, how have my December Stocks done so far?



















Well, I have done OK, not great but OK. It looks like I had one really good winner and overall matched up against the indexes just fine.

The DOW is up 1%
The NASDAQ is up 2%


But I did not invest in any of these...



Instead I invested in a pick from last month which remained in my ever watch full eye.
















IAX specializes in absorbent materials and products for the pet industry. Basically Kitty Litter and Beds/Pillows. It is a small company with high insider ownership and low industry ownership and low availability of outstanding shares.

All of this adds up to a bit of a greater risk and, quite frankly it was a bit of a risk to invest in this stock. What attracted me to this stock was the fact that it was small, profitable, at an attractive price, and had an interesting "step" setup pattern.

This setup can have great potential if all the pieces are in play. Such as good relative strength, money flow, and volume. Trouble was this was not 100% true. Look at Mid April, Late May and Mid August stats for Money Flow and Relative Strength. Each time there was a pick up of activity prior to the price jump and maintained during each rise. This time I did not see this pick up, but I did see that the price was maintaining strength above the 50day moving average.

So I took a chance.

As it turned out, I was lucky. IAX agreed to be bought out by Kinderhook Industry which specializes in buyouts and acquisitions of Value Companies and Good Management Teams. This obviously was good news for the stock which shot up nearly 20%.

SOLD!.

So, Which stocks look like they have favorable setups now?

Lets start with the chanciest and end with perhaps the safest.

FLR

















FLR is basically an engineering and construction company which specializes in the energy field. As you can see by the chart, the stock has been falling quite a bit lately. And normally one is wise to listen to the old saying about trying to catch a falling knife...

But... This is actually a well run company with a good pipeline of contracts. I believe much of this fall in price is due to the scary condition of the energy exploration industry overall.

So why do I consider this a setup? Well, for two reasons.

Recently Jim Cramer shouted a Buy! Buy! Buy! on this stock and the Commonwealth of Kentucky issued a draft air permit for Kentucky NewGas, a planned coal-to-natural-gas facility that will take about four years and 1,200 jobs to build.

Rumor has it FLR is/will be a big player in this. And we can add a third reason...
Saudi Arabian Mining Co (Maaden) 1211.SE has received four bids for an $1 billion contract to build an alumina refinery. Guess who is a big part of this bid?

Now for the full discloser. I HATE JIM CRAMER!!!

In fact I would probably do the opposite of anything he says. But...

I love buts conditional clauses...

His Buy Buy Buy shout out seemed to generate a 7% gain in this stock over night. Couple this with the two contract announcements... Coincidence ? Perhaps. But maybe something is about to turn around and maybe there is just enough hype to go along with this increase in contracts to fuel this bounce.

Now for a less risky setup...

AGX

















This diversified company focuses on either acquiring or financing other companies that provide products and services to growth industries.

Currently their subsidiaries include:

Gemma Power Systems LLC (www.gemmapower.com), a leading power plant designer and builder with expertise in engineering, design, procurement and construction.

Southern Maryland Cable, Inc. (www.smcinc.biz) , provides inside premise wiring services to the federal government.

Vitarich Laboratories (www.vitarichlabs.com) is a farm to market, vertically integrated private label manufacturer that manufactures, packages, and distributes premium nutraceutical products, including nutritional and whole food dietary supplements and other personal healthcare products.

AGX stock has recently maintained a good support line at $12.00 and has seen good relative strength and money flow at the same time. As long as it maintains the $12.00 support level, it could provide a good chance to reverse its pattern and start climbing back up the charts.

And Finally...

MSFT

Everybody knows Microsoft.
















Microsoft is currently hitting up against highs either at or near $30.00
If you look at the chart, the stock is well above the 50day moving average, (a good sign) has established a cooling off period after a good run without loosing price, ( another decent sign) and if you look at the pattern, each hit at the top is followed by a dip. Now, what is important here is that each of the low points are higher than the previous. This can often signal what is called a breakout past resistance.

Of course, it could fail in its breakout and go back down to it previous (26 -28) range before moving back up. But with the anticipation of the holiday season and new releases, it may be a safe bet that folks are thinking that good ol' Microsoft stands a chance to make a buck or two and positively reflect this is the price of the stock.

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