Stock markets were very disappointed by Maria Draghi on Thursday and vented their frustration in the only way they know. Stocks fell hard while the Euro gained, moving from 1.05 to 1.10 $ to purchase a single Euro. That won’t help the Euro economy much and I suspect that strong German hands were involved in watering down any of the promised stimulus.
Today the NFP jobs report as predicted by the ADP report on Wednesday exceeded expectations. The report today showed that 211000 new jobs were created and that’s on top of the 298000 created last month, which was also much bigger than anticipated. In response the Dow has climbed over 300 points and has reclaimed most of Thursday fall. The SP500 a broader measure of the US market charted a similar move but the Russell 3000 rallied a smaller amount.
The FT100 didn’t participate in Friday US move upward move with the VectorVest Composite falling both day over day and week over week. This has printed a red light on the price column of the Color Guard. Both Primary and Underlying trends are down and VectorVest does not recommend buying any shares at this time. The most conservative signal on VectorVest the “Confirmed Call” has ridden out the selloff over the last two days and remains on a BUY and does the DEW Market Timing System. A very mixed bag.
There is no respite for commodity shares as the iron ore price fell below 40$ per ton. Anglos iron ore subsidiary Kumba needs a price of 50$ to turn a profit and with woes at DeBeers as well, Anglo looks likely to pass on its dividend. BHP and Rio Tinto can make a slight profit at 40$ according to Investec. The copper price remains on support as defined by the channel that’s been in place during the rout in price over the last 5 years. I am hoping that we will see a bounce at least from here but am wary of the “falling knife” metaphor. It’s still early in the cycle to get involved in commodity based shares and suspect there needs to be much more pain before a bottom is in place.
I am sure that the US NFP report will be all that Yellen requires to action the first upward move in US rates since 2006.This will put the US on a sharply divergent path from many other advanced nations. Although the ECB didn’t make markets happy on Thursday the bank still intends to print 60 billion Euros per month for at least the next 6 months. I suspect that the trend downwards in the Euro$ will reassert itself sometime soon.
My stocks have had a good week with Bellway, Avon, JD Sports, Howden, Go Ahead and Greggs advancing even during Thursday’s general market selloff.
JD seems to have broken upwards from slumber as the probabilities favored. The share is undervalued and growing earnings both aggressively (RV) and safely (RS). The share is in the throes of a strong trend as measured by VectorVests secret weapon the Comfort Index. This combination of strong earnings growth and strong trend, finds outstanding shares with enormous risk to reward ratios. JD has been very profitable over the last year and with the breakout seems certain to get much higher.
Dr. Bart DiLiddo, the founder of VectorVest words echo often in my ears. He says it’s our job to find the very best shares and then manage them well. For me the combination of an undervalued share that’s is growing earnings strongly whilst in the throes of a strong trend finds these easily and without effort.
On Unisearch within the VectorVest program this is done with a few mouse clicks. Here are the Unisearch settings
- RV>= 1.4
These shares are then sorted by the standard sort VST (Value, Safety and Trend).
If you have any problems inserting these values or if you would like to test VectorVest then please call the help line on 0800 014 8974 in the UK and 0800 981 891 in SA.
I then “Cherry Pick” the top shares found by the search by eyeballing the chart. The process is detailed in chapter 4 of the Quick Start course which is a part of the VectorVest program but in brief the following is the process
- Over the last year the share price is rising with little volatility. The CI assures that the trend over the past three years is strong and thus needs little scrutiny.
- The share is trading below the VectorVest valuation. The more undervalued by the market the better.
- The VectorVest computed Earnings per share (EPS) is rising steadily from bottom left to top right of its part of the computer screen. I have found that a smoothly rising chart of EPS over the past year greatly increases the probability of a positive and winning trade.
- I like to see a share like JD Sports that fulfills all of the above but has traded within a consolidation pattern such as a rectangle or triangle for a few weeks. If I observe a consolidation (such as the one on JD Sports) and within the consolidation the EPS is rising, then the probabilities strongly favour a positive breakout.
That’s what happened at JD Sports and it’s why I bought into the share a few weeks ago.
The chart of JD Sports is shown below.
If you follow the above template you will find trading a very rewarding pursuit. Clearly there will be losers and that’s why money management is vitally important. The simple key here is to risk only 1% of your bank on any single trade. This means that the difference between your entry point and the VectorVest calculated stop loss in pounds should represent 1% of your account.
Watch stops closely as the underlying trend is down and don’t ever give back more than 50% of your profits on a trade.
Trial VectorVest – click here
5th December 2015
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