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Trading Lessons

Stock Market Monthly Analysis and a look at RIM

Stock-Markets / US Stock Markets Jul 17, 2008 - 11:18 AM GMT

By: Christopher_Quigley

Stock-Markets

Best Financial Markets Analysis ArticleThe bear market in US stocks which was initially flagged by the Transport Index in July 07, and was confirmed by the Industrials in October 07, is gaining pace as can be clearly seen in the chart below: the industrial index has crashed through the red 200 day moving average (dma) line.

High oil prices, a crashing real estate market, growing banking troubles and falling consumer confidence all indicate that this bear still has more legs. As with all pullbacks, at some stage it is reasonable to expect an oversold bounce, but given the current market sentiment I would not participate in any long strategy until the earnings season is over. Thus I advise waiting until the forth week in July before considering investing on the bull side.


If you wish to short the market I recommend using QID the ultra short ETF that doubles any slide in the QQQQ tech market index and is twice as efficient as shorting the QQQQ's directly. As always the ideal place to enter this type of trade is when a basing or consolidating position has been broken.

The Transport Index meanwhile continues to confirm the bearish trend but has not yet broken the 200 dma line.

Of course there is another issue facing the market that is adding to the perceived risk, namely the Middle East . Should additional conflict start then the situation could become too risky to judge and the prudent place to be would be in cash. Many may decide to go long oil however, I would avoid this temptation as oil is very overbought and is due a correction. The smart money always sells when everybody else anticipates buying.

A trade which momentum investors may wish to consider at this juncture is the gold ETF: GLD or the silver ETF: SLV. With US banks going into receivership and Fannie Mae and Freddie Mac being bailed out (nationalized) inflationary pressures have to grow due to the debasement of the US dollar. Such inflationary policy has to favour the money metals.

As with all such trades our normal stop loss protection should be put in place.

Monthly Stock Pick

From my point of view I believe that there are great growth stocks out there that are being oversold by herd sentiment. In any bounce, or turn in the market, these stocks will quickly recover because they offer real value based on the wealthbuilder model which highlights earnings, return on capital and growth.

I recommend that student-clients keep Research In Motion (RIMM) on their watch lists.

RIMM is a top-notch technology company that owns the Blackberry mobile products that are becoming ever so popular with the advent of wireless broadband and 3G systems. The company develops and manufactures wireless hand-held devices and radio modems, and provides related services for mobile computing and data communication. The company's Blackberry services allow users to send and receive e-mail and access personal information functions, including calendars, address books, and task lists.

Fundamentals should continue to benefit from a solid portfolio of products and healthy channel expansion in both North American and international markets.

Return On Capital: 20%

Financial Strength: A+

Projected Growth: 70%

As always use technical analysis to position your buy point. This would be a bullish price action, moving off a moving average line on above average volume. The converse of this would be a sell signal.

That's all for now. The next market brief will be posted mid-August.

Thank you and the best of luck.

By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.

Christopher M. Quigley Archive

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