« 2009 September: Stock Trading Picks

The markets extended the bull run by a few percentage points in September. Nearly a dozen stock picks that each gained around 10-20% or more, including one with an 85% gain accumulated over the preceding two months, were closed during the month.

Market Action

Let's take a look at the action on the broad S&P-500 Large Cap index, in order to get a feel of market conditions, before moving on to a selection of stock trading picks closed in the month.

The momentum indicators were showing that the markets had gotten rather overbought by mid-Aug. A dip on the first day of September put the butterflies in the stomachs of the bulls. It proved a one-day event, however, and the markets were able to bounce off the centerline on RSI. The S&P-500 was able to rally 7% over the next three weeks or so, before a negative divergence developed on RSI and a bit of a correction took place into the end of the month. The final tally was a 3.6% net gain for the index, over its closing level from August.

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Long Stock Picks

Now let's take a look at a selection of long (bullish) stock picks, before moving on to a list of short (bearish) picks that were closed during this month.

A long stock pick was initiated on ALU in mid-July, when the stock had just pulled out of oversold conditions on RSI and was set to make positive centerline crossovers on RSI and MACD. After a brief consolidation, the stock went on to break intermediate resistance at 2.90 and thereafter embarked upon an intermediate term rally that brought a profit of around 85% on the trade, before a decision to take profits was made.

CMCSA had made a low at 13.05 on declining volume in mid-July, before rallying on increasing volume to a high of 15.40 in early-August. Over the next two weeks, the stock made a 50% retracement of the run-up and quickly bounced back towards the highs on high volume. We highlighted the setup as a potential buy, based upon any breakout above resistance. The stock ended up breaking out - and triggering the trade - in late-August. After an initial stutter, the stock was able to replicate the first leg of the rally and profits were booked, around three weeks into the trade.

FDX had rallied nicely between mid-Jun and early-August. In mid-August, the stock stopped just short of issuing a sell signal, when it found support at the centerline on RSI and moved back towards the highs. We anticipated that a measured bull move was taking place and decided to play a buy trigger at the highs. The trade triggered in late-August, and thereafter rallied as much as 12 points in the 2 weeks that followed.

A long pick was featured on HON just before the stock was set to break intermediate resistance at 36.50. A nice little profit was booked, just under a month later.

ADBE was opened as a long stock pick, when the stock broke out of a falling wedge (bullish continuation) pattern. The stock rocketed from 32.5 to 35.5 in next to no time, before a piece of news brought about an abrupt two-point drop, leaving a profit of a couple of percentage points, on the trade.

By late-August, it was starting to look like CBE was in the process of completing the right shoulder of an inverted head and shoulders bullish continuation pattern on the intermediate trend. While the conventional method is to enter upon a break of the neckline, we decided to go the aggressive route and open a long stock pick - as well as a model portfolio position - based on the apparent completion of the trough of the right shoulder. It proved to have been a good decision, because the stock quickly went on to break the neckline and thereafter rally a good three more points, before stumbling a bit and leaving a profit of 2.5 points on the trade.

EMR was another long stock pick that also made it to the model portfolio. The stock was added to the list when we noticed that it seemed to be finding support at the centerline on RSI. The trade was triggered when minor resistance at 37.75 was surpassed.

An ascending triangle that formed on the chart of FCX in August, paved the way for a gain of as much as 6 points, after a breakout in early- to mid-September.

There were several reasons for which WFR was worth getting into, early in September. These include intermediate price support at 15.25-15.50, a positive divergence on MACD, and a positive centerline crossover on RSI. The setup was worth as much as 2.5 points in the two weeks, since the trade was triggered (based upon a positive centerline crossover on RSI).

PKX was placed on the long stock picks list, courtesy a falling wedge (bullish continuation) pattern. The setup was worth as much as 13 points in the week following the breakout.

RIMM seemed to be finding support at the centerlines on RSI and MACD, when we featured a long pick on the stock, based upon any breaking of minor resistance at 78.20. The stock rallied nearly 10 points in the two weeks following the breakout.

RES was showing a double bottom on the intermediate trend, in early-September. A long pick was opened on the stock, once resistance (at 9.23) was broken. The stock reached the target derived from the pattern, with a week of the breakout.

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Short Stock Picks

Most of the trading action in September was in one direction - bullish. As such, no short trading picks were closed in the month. However, several short stock picks were opened at the end of the month, when it appeared as though a bearish reversal was brewing. The results of those trades will come to light in October (or later, if there is a prolonged decline in the markets).

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That was a look at selected stock trading picks from September '09. For a look at options trading picks closed in this month and trading picks from other months, please take a look at Past Trading Picks.

For a more in-depth look at our trading methods, we invite you to read the write-up - 'Identifying the Best Trading Opportunities.' 

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