AIXG

Click chart to enlarge

Charts don't get much more ominous looking than this. AIXG has spent the past several weeks forming a descending triangle. The odds strongly favor that this chart will break down into a new, lower trading range. We believe the market is not all that far away from doing the very same thing. This does not deter us from our plan, but rather has us excited that better prices may be just around the corner. The lack of buying interest in the broader market is becoming more evident with each trading session. Hopefully all stocks will capitulate in a fast and extraordinary selloff that marks the bottom of this correction.

Rubicon

Click chart to enlarge

We promised we'd ferret out the material suppliers of the LED market, so here's one stock for you to look into. Rubicon Technology (RBCN) makes innovative crystalline products for LED applications. Unfortunately, it's not easy to put a price on the stock, as the company is in the red. It is expected to become profitable sometime this year. We'll file this one as the most speculative one of our "4 horsemen of LED". We don't normally buy large positions in stocks of companies that aren't generating profits, but we wouldn't mind gambling on this one with a small percentage of our portfolio given the potential of the entire sector.

RBCN is currently trading near the bottom of its channel, making it attractive on a technical level. VECO is supposed to be reporting earnings on Feb 8th, with RBCN reporting on Feb 9th.

We'd like to have about 1/3rd of our portfolio in the LED stocks before these earnings release dates. It would not be suprising if these stocks sold off just prior to their respective earnings releases. When an uptrending high-momentum stock sells off strongly just prior to earnings, we see it as a rare opportunity to sneak on board the train.

Broader Market

Click chart to enlarge

The chart above is a chart of the Dow from 11:41am today. It's too early to say the market is going to have a down day, as it could well close up 200 points. But from its early indications, we may just get that broad market correction we've been looking for. To confirm that a correction is taking place, we'd need to see a simultaneous and decisive break of both the bottom of the trend channel and the moving average. If the market closed here (down approx 190), we would have neither just yet. Still, it would be a good sign that bargain prices may be in the near future. The financial news will tell you that the market fell this morning because Obama plans on further tightening banking regulations. This actually has nothing to do with why the market is selling off this morning. The financial news folks are the most frustrated individuals in the world. Every day, they have a stack of positive news stories in one pile, and a stack of negative news stories in another pile. Depending on which way the market goes each day, they blame it on stories from either the positive or negative pile. The real reason for the majority of the market's moves is just human nature. If the market goes in one direction long enough, people get bored. It's been going up for 10 months now, and is due for a correction. The "news" is irrelevant.