Author: Steve Beamer
Model: High Earnings Momentum
Disclosure: Long AGU, ARUN, FFIV, MIPS, MPEL, SLW, TQQQ
Commentary from December 29, 2010
The High Earnings Momentum Model started in late November and has basically held even in December.
General Market
The long term trend is upward with indexes making new highs. The three month outlook is also upwards with about many of stocks trading above their 200-day moving averages in the major indices as of December 29th.
Trades I closed in December
CSTR – Coinstar had a gap up in mid-November with strong buying which is a sign of strength. After entering this stock on December 6, it began to drift downward and is testing the top of the gap up. My stop was much closer and I was stopped out at for a small loss.*
JOBS – 51Job, Inc was moving up nicely with good institutional buying and I purchased shares on November 24 with a very tight stop.* I exited on December 15 when my stop was hit. JOBS has been consolidating in the $49.00 range for about two weeks in low holiday trading volume and is testing the 50-day moving average. This trade might have been successful with a little more room and I will keep an eye on this stock for a possible re-entry.
NFLX – Netflix was a great stock to own in 2010. I chose to buy NFLX as it broke the $200 barrier on Nov 30. Unfortunately, a lot of media hype and some Netflix bashing on CNBC sent it back down under $200 in short order and I got hit for a small loss.
My Open Trades
AGU – Agrium has been consolidating since October, forming a symmetrical triangle which broke out on 12/23. I entered on Monday 12/27 with a fairly close stop. The stock has moved up nicely with strong volume and is doing well at the end of December.
ARUN – Aruba Networks was trending nicely and I bought it on November 24th on a couple days of strong institutional buying. Since then it has moved mostly sideways. During the light holiday trading it has drifted down near my stop price.* I expect to be taking a loss on this trade and moving on but would like to see normal trading volume return before giving up on it.
FFIV – F5 Networks – A similar story to ARUN, purchased on 11/24. Initially it moved up nicely and has drifted back down with light holiday trading. This stock has held its value better than Aruba and still looks to be a good trade.
MIPS – MIPS Technologies – I entered this trade on 12/8 after a strong up move and a rest (consolidation). The stock moved up quickly and has drifted down over the holidays on very low volume. I expect it to get moving when normal volume returns after the New Year.
MPEL – Melco PBL Entertainment Ltd (Macau) is a casino stock which had a nice move up similar to WYNN, earlier in the year. It had a 6-week pullback in November and early December and broke out decisively with significant volume right before Christmas. I bought on 12/20 with a close stop.*
SLW – Silver Wheaton is the sector leader in silver mining which tracks pretty closely with gold and is in my price range. I bought in on 11/24 and it has continued trending upwards.
TQQQ is the Proshares Ultrapro QQQ. This is a leveraged Exchange Traded Fund (ETF) which attempts to return 3x the return of the NASDAQ 100. I have allocated much of the cash in the portfolio here as a way to keep money in the market during the uptrend until I find individual stocks to trade.
Overall the portfolio had a relatively flat month in December with some decent gains balanced against weak performance by ARUN, CSTR, JOBS and NFLX. I will be looking for ARUN to move upwards or stop us out* in the near future or I will sell it and move on. My other positions are looking fine and as I find good stocks to buy, I will sell the TQQQ and invest in individual stocks.
*Note: The Covestor replication process does not take stop losses into consideration. It solely replicates executed trades.
