Are GNW and BAC dead stocks walking...?
November 21, 2010
– Comments (24) |
RELATED TICKERS: GNW
, BAC
, AKAM
If you are aware of what happened to GNW and BAC stocks year-to-date, most likely you are thinking these stocks are dying a slow death. I mean, which stocks go from a 52W high of $19 down to a 52W low of $11 in a matter of months (6 months to be more precise)? Certainly not future winners, right?
Take a look at their 2010 charts (talk about stocks breaking down...)
Nowhere but down for these two stocks, wouldn't you think?
Well, I have a different opinion.
I think GNW and BAC are just going through the same cool-down phase AKAM went through in 2004. Take a look at AKAM's 2004 chart first, then I'll explain what I mean.
Do you see it? Don't their charts look almost identical?
I know, I know. I know what you are thinking. How stupid must one be to dig up a chart from 6 years ago and say Look at it, like that really proves anything.
Well, I didn't just dig up AKAM's 2004 chart because it looks just like GNW's and BAC's 20010 charts.
There is much more these three stocks have in common.
During the bull market of 2003, AKAM was a huge winner - it went from $1 in March of 2003 to $13 in December of 2003 (1,200% return).
Let's now take a look at what happened to GNW and BAC during the bull market of 2009:
As you can see, GNW went from $1 up to $12 (1,100% return) while BAC went from $3 up to $15 (400% return). Both huge winners during the first year of a new bull market just like AKAM was in 2003.
But that's not all. There is one more thing that's common for all three of these stocks: The VOLUME story.
Take a look at AKAM's January 2001 - December 2004 chart and compare the difference in the volume during the period AKAM started exploding (with the beginning of a new bull market) vs. the 2004 cool-down period.
Do you see it? Do you see how AKAM's volume at the beginning of a bull market jumped to the highest-ever volume and how it stayed much lower during the cool-down phase in 2004?
Let's now take a look at GNW's and BAC's 10-year charts:
Same thing, right? Highest volume ever while they were exploding during the start of the new bull market, and very low volume during a cool-down period. In other words, there were many more people (we are talking big money here - not just any people) willing to jump into these stocks than there are now who want to get out of these two stocks. That's important, don't you think?
And so, we got to the end of this post filled with charts. But there is still one more chart you need to see. A chart without which none of this would make any sense.
It's a chart that will show us what happened to AKAM after a cool-down year.
Here is AKAM's chart from January 2005 to December of 2006 (that's when the party ended for this stock):
Well, what do you think? Does any of this make any sense to you?
None, right? That's what I thought.
That's exactly the reason why I'm slowly building large positions in GNW and BAC. Six months from now, they will most likely be my two biggest positions.
And yes, of course I will remind you of this post when GNW and BAC hit $50 two years from now... :)
Good Luck Everybody, and don't forget to have fun when investing.
DLZ
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