Click chart to enlargeThe chart of CREE above exemplifies why relative strength is the single most important attribute for a stock to have. When the market was correcting, CREE managed to stay above the moving average. Now that the market is hinting at a possible technical recovery, CREE is off to the races. No doubt it will make new highs LONG before the market itself.
If the market is just gearing up for another leg down, CREE will be able to absorb that plunge most likely without breaking through its moving average or trend channel once again.
VECO shows similar strength, but AIXG has become a weak stock. If AIXG does not begin to show signs of renewed strength, we may have to let it go.
We bought some MRVL today after researching it more thoroughly. The company is posied to experience explosive earnings growth over the next year or two. Having the support of fellow "aggressive growth" investor, Ken Heebner, doesn't hurt either. We like the prospects for the stock, and will more than likely be adding to it so long as it continues to gain popularity among investors. Popularity is the one element that is hardest to quantify, as there is no fancy formula to plug it into. Yet, it has more influence over a stock's future than any other variable.
CREE has certainly caught the attention of the investing public, and we hope to see that interest last for another few quarters, provided it doesn't overheat beforehand. Stocks with this kind of "popularity" run the danger of getting way ahead of themselves, hence our use of trend channels to help us scale into and out of positions in companies based on how close they are to the reality of their earnings potential.
We are now 36% invested, holding CREE, VECO, AIXG and MRVL. Cramer, are we diversified?
2 comments:
What site do you get those charts from?
Skip, they are from TD Ameritrade's Strategy Desk software. Pretty sure you need an account with Ameritrade to access it, but it is free. You can view intraday charts, as well as use many drawing tools and indicators. It's an excellent program, probably worth getting a small account going with them even if just for the software!
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