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Trading Lessons

Financial Markets Monthly Analysis and Stock Pick

Stock-Markets / Financial Markets Aug 06, 2008 - 11:21 AM GMT

By: Christopher_Quigley

Stock-Markets Best Financial Markets Analysis ArticleFollowing the second quarter earnings season the market lacks conviction and is still trying a bullish “bounce up” in an overall bear trend. I would ride any upward move until the “technicals” signal otherwise which I suspect will be the middle of September as we approach the release of third quarter earnings.


The expected correction in Oil is occurring as recesssionary implications begin to kick in Worldwide.

This is because the “sub-prime” crisis is not simply an American phenomenon but in actual fact has affected the entire international banking system. The bottom line is banks are being forced to take liabilities back onto their balance sheets following the Basle II agreement. The implication is, that due to fractile reserve banking rules, multiples of credit lines are being destroyed as we speak. Accordingly, banks must repair their reserves, and for years to come credit will be difficult to obtain.

The next “crisis” will be in the credit swap market, which dwarfs the “sub-prime” problem by many trillions (yes trillions). This again will restrict financial lending among banks as nobody knows the true weakness of banking structures. Thus it can be expected that once the current strength in financials wanes the next trend will be down hard and may result in an overall stock market capitulation. For my part I would prefer the pain to be over quickly rather than drag on for many years.

The technical position of the QQQQ's is very telling.

For over the past month or so it has moved between 43 and 46. In Dow theory this type of action is called a “line”. The longer the line continues the more significant the direction of the eventual breakout, particularly if the move is supported by high volume. For the active investors among you any such breakout action should be traded as it will have a very high probability of success and, if a 3% sell stop is used, you can lock in profits while mitigating losses from any trend change.

Stock Pick

TJX Company

The TJX Companies, Inc. is a leading off-price retailer of clothing and home fashions. Its Marmaxx division comprises: T. J. Maxx (847 stores) and Marshals (762 Stores).

The company has been one of the only retailers to consistently post comparable-sales

gains in this rough environment. This is largely the product of a smooth-running off-price business model that allows TJX to remain somewhat shielded from a consumer downturn. In fact, there are a number of ways in which it benefits from this type of environment.

The company plans to expand into Europe and Canada where stores have performed well and there is little competition currently. There is no off-price brand-apparel company of TJX's size in Europe and the market opportunities are tremendous.

Financial Strength: A+

Earnings Growth: 14.5%

Return On Capital: 33%

P. E. Ratio: 15

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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