I wrote a quick entry about Sirius Satellite Radio (SIRI) last November and spoke about the main reasons why I was staying away from buying the stock, even after the huge speculation placed on the company from the Howard Stern announcement. As we all know, the stock moved from $3 to $9 intraday before getting smacked back down in 2005.

Reading my original post from 11/23/04,
Sirius Satellite Radio (SIRI), you will see that I wasn’t very fond of the stock due to the fact that it was continually losing money. I specifically stated:

“You won’t see SIRI on our weekly screens because of the fundamentals”

“I did not buy the stock for 2 reasons:
1. I don’t buy companies that don’t show a profit.
2. I currently have established positions in other stocks.”

Sirius (SIRI) closed at $6.71 on 11/23/04 and is currently trading at $6.14 at 2:15pm today (1/18/06). It reached an intraday peak of $7.98 recently but has not lived up to the hype and speculation that everyone anticipated after the $500 million signing of Howard Stern. It moved briefly from $3 to $9 on the speculation but all stocks come back to what they are worth. In this case, (SIRI) is only worth $6. Buying in late November of 2004 would currently give you a slight loss and would have your money tied up in a dead stock with a media whirlwind. I’ll skip the media speculation and continue buying companies with increasing earnings, sales and profits. If I bought (SIRI), I would have missed:
(FORD)
(HANS)
(AAPL)
and others.

I think you get the point.

Piranha

…Apple has been on my screens for 15 months and has been in my portfolio on two separate occasions over those 15 months. The most recent purchase was last summer as it broke into the $40 range. The first screen Apple made on MSW was on 10/24/04 at $23.71 (split adjusted from $47.41 – my actual entry area). I first added Apple (AAPL) to my portfolio in late 2004 due to the strong fundamental and technical characteristics, as noted on this blog when it appeared on the MSW website. If you would like to go back and read that blog, please visit the archives from last January or click this link:

http://marketstockwatch.blogspot.com/2005/01/green-apples.html

At the time I wrote the blog entry from above, I noted how Apple had just shattered earnings estimates and had gained over 57% while on my screens. Many novice investors were just jumping on the bandwagon while I was thinking about getting off. This is what I said:

“Many people went out and bought Apple today based on the great news from yesterday (Apple shattered estimates). I am not saying that AAPL can’t go higher but I know from experience that it may be too late to join the party when the news hits the street and everybody knows, even the “dumb money.”

Guess what happened? Apple went on to peak the following month (February 2005) and then went into correction mode for the next 5-6 months while I sold my shares for a profit and watched it from a distance. Are we starring at déjà vu?

As the new base was forming, I stared to show interest to jump back into the stock in July as the right side of the cup was forming. The breakout came in August 2005 as the stock made a new 52-week high on volume larger than the previous week. At this point, I was already back covering the stock heavily on MSW and adding it to my portfolio. Two months later, the stock started to consolidate and tested the support level (the 50-d m.a. in this case). I told the entire community that I was a holder and they should do the same but the ultimate decision was up to each individual. Even though Apple (AAPL) was falling, the RS line was better than most stocks at the time as the general market was falling even more. I thought that Apple could be a leader if the major indices could make a turn-around in the fall. Besides, the stock recovered the moving average by the end of the week – a key signal of strength when looking at the bigger picture (see weekly chart below).

Since adding the stock back to the screens in July, Apple has gained over 100% and has moved up into the $60-$100 range. Overall, a long term holder from my initial coverage in October of 2004 would have a gain of 260%+. Two weeks ago, I said this to the community: “trend buyers could add shares now”. If they did, they are now up an additional 12% from the latest breakout point.

Apple will now enter the MSW All-Star list as I update certain members from 2005. The stock is looking to clear the final leg of the $60-$100 run. I rated the (AAPL) as a hold on the latest screen and wanted to mention that earnings are due tomorrow (Wednesday, January 18, 2006). Strong support sits lower in the mid $70’s but as I told one member in e-mail earlier today, never try to get out at the top. It is up to you to decide if the 100%+ gain is sufficient or if you would like to grab more. We haven’t seen red flags to this point so there is no urgency to sell but some investors get nervous before earnings are released. My gains are very large in Apple so I will hold through the release and make my decision then.

As I said last year, I love the iPod and always use it at the gym and believe that the company will continue to create innovate products but never fall in love with a stock.

Good luck and we shall see what the release brings us tomorrow. I don’t need to get out at the top when I have already met my objective!

Piranha

…As you already know, Sierra Health Services (SIE) was removed from the Index this week with a 58% gain on MSW over fourteen months. The stock peaked at $41.48 for a top gain of 69% and closed at $41.05 last week with a 67% on the MSW Index. I am removing the stock for two reasons:

1. Its recent 2-for-1 split out of the $60-$100 run
2. The recent violation of the 50-day moving average.

I will note that it still has major support at the 200-d m.a. but I feel now is the right time to take profits. The support below dates back over two years so the stock can still rebound and move higher but sometimes it is better to take a profit than to hope to get out at the top. As a trader, you must act on that inner feeling from time to time, especially when a solid profit is involved.

Sierra Health (SIE) challenged the 200-day moving average on five separate occasions over the past 14 months but I never had the urge to remove the stock until now. As I mentioned above, it may gather itself during the current consolidation and move higher but I just don’t feel right sitting around during this late stage base while new leaders present themselves.

The only time I became concerned was back in September when the stock violated the 200-d m.a. intra-week but I left my emotions aside and decided to keep the stock until it violated a sell rule and closed below the moving average at week’s end. Also keep in mind that the market was going through a correction in September and the relative strength of SIE was better than most (even during the slide). SIE didn’t close below the line and the stock actually moved higher by 25% over the next several months on above average volume. The current relative strength is weaker than our new leaders so this may be foreshadowing of future performance.

As you look at the chart below, you will notice that the stock has been churning slightly above $40 and has met strong resistance near $41. If the stock did not split, I would give it more of a chance to finish the $60-$100 run but that is no longer the case so I am moving on. It’s now up to you to decide what you need to do.

Piranha

…Hansen Natural (HANS) has been one of my best holdings over the past eight months. I originally picked up shares last May above $66 before the most recent 2-for-1 split. I told the entire community that “stocks that seem high to one investor may seem low to another”. This wisdom held true as the stock easily moved up through the $60-$100 range within a couple of months. The stock showed some red flags and stalling action near $100, so I sold my position and advised everyone to do the same before the stock dropped out of the $90’s (this was in July, 2005). The stock corrected over the next 14 to 15 weeks as I keep it on my back burner since it didn’t violate any long term moving averages such as the 200-day. It then broke out of this four month base in late October and I again grabbed shares and touted it as a $60-$100 candidate for the second time (since it split 2-for-1).

I placed it back on to the MSW Index on November 5, 2005 at $57.63 and said that it had a very good chance to make a second $60-$100 run this year. Pre-split adjusted, I was buying back into the stock near $115 per share but I still thought it presented a great buying opportunity when looking to the weekly chart. The investors that thought the stock was too high in May at $66 probably thought I was crazy to buy back in at $115 (pre-split adjusted).

Over the past two months, (HANS) has made great strides and has again completed the $60-$100 run with a powerful move today. My physical stop is placed at $89.89 but I am going to raise this stop slightly below $95 so I can guarantee myself a 60% gain minimum. It will remain on the MSW Index until it violates any sell rules or support areas even if I take my profits off the table. Without the split, today’s shares are worth over $200 from my first buy last May above $66 (a total gain of 203% in eight months). I guess the shares were low to some investors even through other less experienced investors thought the stock was too high. I don’t blame them because it was scary buying into a stock that ran up from $5 to $66 before I placed my first position.

FYI: Last Saturday, HANS filled its spot on MSW Index with a closing price of $85.66 and I set a new breakout price of $88.39 from the recent consolidation. It crushed that area this week on above average volume.

I hope many of you have learned to dismiss the idea that “high priced stocks” can’t give you excellent gains in a short period of time because this is completely untrue. If you want to argue, please see HANS and the other $60+ stocks that have made the run on MSW.

Piranha

…The “Talking Heads” are at it again as the DOW topped the psychological level of 11,000 yesterday. I read several articles and heard several analysts predict that this year will be great due to the action over the past five days. One analyst predicted a new all-time high with the DOW topping 12,000 at some point. Now, this isn’t a stretch but I still don’t understand how these “so-called” experts haven’t learned their lesson in the past by trying to predict what the market will do over a twelve month period of time. They have been wrong so many times in the past; you think they would learn from their mistakes. We currently know the market is trending higher and until further notice, we have a bullish outlook but I am not going to step out on a limb and predict a “great year” after one week of trading – that is pure ignorance.

In my opinion, only an amateur or a non-trader would say something like that (hence, the mainstream analysts). These guys don’t trade for themselves and we all know this because they must disclose if they are trading in a specific security that they have written about. If you look to the bottom of each article they write, it usually says “at this time, the author does not hold any of the securities mentioned above”. Of course not, they don’t trade, they BS the public. I don’t disclose every trade I make but I do talk about many of the moves I make and I have been wrong in front of this entire community (it happens – that’s life). Read what one analyst had to say yesterday:

“A strong close today is going to be suggestive of a strong year,” said Joseph McAlinden, chief investment officer at Morgan Stanley Investment Management, on CNBC’s “Street Signs.” He expects the Dow to clear 12,000 this year, which would eclipse the Dow’s all-time high close of 11,722.98 on Jan. 14, 2000.

So a strong close yesterday signals a strong year according to this analyst. Really, since when does one day of action predict an entire year of trading? That answer would be never!

Here is an insert form Investor’s Business Daily (today’s edition):

“There’s no way to accurately predict what will happen the rest of the year based on five days of trading. The NASDAQ motored 7.5% in the first 3 1/2 weeks of 2004. It then dropped nearly 19% in the next 6 1/2 months…”

I guess the analyst has a short term memory or doesn’t have any true experience trading in the market; otherwise he wouldn’t make such a novice statement. I don’t to mean single out this one guy and I don’t know who he is but the quote is entirely unnecessary. If the market does rise this year, he will be considered a genius by his non-trading peers. If it goes down, they will blame it on outside conditions or uncontrollable factors while giving him a raise next year. The chance of him being right is 50/50, not bad odds when nothing is on the line (unless he plans to load up his portfolio based on his observation over the past five days).

Bottom line: be aware of who you take advice from and always do your own research and analysis. Also note that many of the market leaders made intraday reversals from their highs yesterday and both the DOW and NASDAQ moved higher on below average volume (two very minor red flags). The daily screens get into more depth about these topics and the strongest NH-NL ratio since last July.
Piranha