The VOLUME story...
September 27, 2009
– Comments (15) |
RELATED TICKERS: CNO
, DDC
, GCI
So far, every blog I’ve posted was pretty much for one single reason: To be able to show you my old blogs (once time proves me right) and tell you: I told you so.
This blog, however, is different. I’m writing it for two reasons this time:
1. To be able to show it to you at some point in the future and tell you: I told you so.
2. To try to help people who are open to new ideas, and people who are trying to find ways to spot future 10-baggers (Isn’t this site about investors helping investors beat the market?).
I know that what I’m going to share here with you is not going to be anything new to a lot of you, but I’m still going to do it. I think we’ve all seen a bunch of blogs calling this rally a “junk rally on low volume”, “this rally has no legs as volume is very low”, and all along I was trying to explain to those guys that they are looking at the wrong volume.
So before I tell you my volume story, I first have to tell you that its roots are based in my blog written on 7/14/09 (link to this blog will be posted at the end of this blog). In that blog I’m basically saying that I’m convinced we are in a bull market (a huge one) that started in March of 2009. I also say that one of the two reasons I’m convinced of that is the huge jump in volume (of shares traded) of the stocks leading the rally to that point. (The other reason I listed is the huge gains the leading stocks had up to that point – some up to 2,000%).
Now, let me list here some of those leading stocks and their charts to show you what I mean (click on the ticker symbol to see the chart).
The time frame shown on the charts will be 10 years – from May 1 of 1999 to May 1 of 2009, and the stocks listed will be stocks that I personally purchased either in March or April of this year (and my purchase was based on what I’m going to show you here):
LVS, CENX, GNW, TCK, FITB
Now, what is the common thing for all of these charts when it comes to the volume? You are right: A huge jump in volume in the months of March and April. And when I say huge, I mean HUGE. Never, ever, in 10 years shown on the chart, these stocks have volume as high as they did in March and April of this year. Not even close. Not when they were going up during the bull market which started in 2002, and not even during the collapse of the market in 2007 and 2008. And before I forget, let me specify that this huge jump in volume of these stocks was during the time when their stock prices were going up, when these stocks started recovering (I hope you agree this is a very important detail).
Now, let me here list for you these same stocks, but this time I’m going to also show you their price on March 9, 2009 (bottom) and the price today (note: not my buy prices and not my gains, but I did buy all of these stocks very close to the bottom):
LVS, March low price $1.42, today $17.60, Gain 1,139%
CENX, $1.06, $9.46, 792%
GNW, $0.91, $11.87, 1,200%
TCK, $2.87, $26.00, 806%
FITB, $1.39, $9.59, 590%
By this point, I hope you are getting what I’m trying to say: Buying stocks based on this huge jump in volume could’ve made you a lot of money (and for a lot of you, I’m sure it did). And I also hope you now understand what I meant when I was saying people are looking at the wrong volume (instead of looking at S&P and DOW volume, look at the volume of stocks leading the rally).
My other point is: Based on this huge jump in volume (never before seen in history of these huge winners, NEVER. Are you getting this?), I also think that this bull market is going to be the biggest ever (which remains to be seen).
OK, so we basically covered everything I wanted to say with this volume story, but one question remains (I always had this question when people were explaining with charts something that happened in the past):
What about the future?, meaning: What does this mean for me going forward? How does this help me?
First of all, it helps you by telling you something huge is happening. If that something really is a new, huge bull market, then you stand a very good chance to profit from it (unless you are long on shorts, and not on stocks).
Secondly, the stocks I listed above as example of stocks that led this rally should (and I say they will) continue to outperform the market nicely, and if you find good entry points, you should profit nicely from them. I'm sure you all also noticed that all of the above mentioned stocks are still 70-80% off their 2006/2007 highs, so if these stocks really completely recover, I hope you know what that means to us... (I also have a theory than no stock goes up 500% for no reason, meaning: "That stock will continue to go up and will be a huge winner...")
And thirdly, I’m going to stick my neck out and will try to predict which stocks are good buys right now based on this volume “theory” (either the huge jump in volume started just recently or they are still cheap stocks. Or both.).
This should then tell us all if this volume thing works or not. And this prediction will either be something I will eventually be embarrassed about or something I will use as my: I told you so :)
Right now, I’m just going to list 5 candidates:
BPOP, today $2.75
GTN, $2.38
CNO, $5.04 (jump in volume and big gains stated in March, but still a cheap stock)
HWD, $8.09 (same as above, but also “only” 370% gain since March 9)
GCI, $9.38, (same as above, but also “only” 381% gain since March 9)
So, these are the stocks I think are good buys right now. Let’s see if I’m going to be wrong or right. These are long term picks, and I will revisit these picks in 3 months, 6 months, 1 year. I expect every single one to at least double in 12 months or less (HWD, GCI), and the 3 cheap ones to triple or more.
By no means this should taken as my recommendation to you to buy these stocks, but more like something to keep an eye on, so if in the end this really shows that these were good picks, then maybe you yourself can use this “volume theory” in the future.
Good Luck everybody!
Disclaimer: I’m not an expert (not just on stocks, but on anything). I either own or will own (again) all of the stocks mentioned above when the time is right. Also, I’m a bull, by nature…
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