Timothy J. Truebenbach is the
President of True Capital Management and general partner of True Capital
Partners LP, a hedge fund. He uses a disciplined model that trades on the
intermediate-term time frame. For a free trial to Tim's Nightly Stock Analysis
Report
click here or call
888-484-8220 ext. 1.
This market is acting phenomenal! We
may very well be seeing the beginnings of a very big rally unfolding.
The NASDAQ has taken the lead role among the indices, which we have been looking
for since late-2004.
One thing we are also seeing now, which we have not seen yet are a quality,
diverse group of leading growth stocks emerging from very sound patterns.
Additionally, many of these stocks are in early stages of moves versus being
extended in their runs, such as the homebuilders were back in late-2004.
Chart courtesy of
StockCharts.com
Large-cap stocks like Google (GOOG | news | PowerRating | PR Charts ) provide insight to
how a stock can rally, pull back in price and resume a rally. This company
sports stellar fundamentals as well as displays accumulation as it re-claimed
its 50-day moving average in early-January, 2007.
Chart courtesy of
StockCharts.com
Mid-cap stocks such as Bidu.com (BIDU | news | PowerRating | PR Charts ) exemplify the quality names that can
be found in this space of the market. This company, for example has triple-digit
earnings and sales growth that is usually only prevalent in small-cap names.
Chart courtesy of
StockCharts.com
Finally, small-cap stocks may very well benefit the most to this type of rally.
Since the early 1900’s, earnings have been proven to be the largest factor in a
stock’s price. Small-cap names such as Avatar Holdings (AVTR | news | PowerRating | PR Charts ) grow earnings
in excess of 100%, year over year. These names tend to be more volatile, but in
a solid market uptrend it is just more rational and easier to move a stock with
a small market cap and huge earnings growth.
Chart courtesy of
StockCharts.com
In addition to these several examples of large-, mid- and small-cap names; there
are plenty of other leading stocks that hail from a broad range of industries
such as medical, apparel, telecom, internet, gaming, computers and electronics.
The depth of this rally is one of the key attributes that plays into my belief
that it can be quite large and prolonged.
Let me pause for a second and define a huge rally in the
NASDAQ: it would amount to a gain of 20-25% in 2007. Leading stocks could easily
do 4 times this! We will continue to follow our rules, but this is what seems to
be unfolding just so you are seeing and understanding the same things that I am
in order to form your own opinion and strategy.
I realize this column is coming across extremely bullish. This
is no doubt the type of market where I make most of my money and I will also
point out that by following price, volume and the action behind leading stocks I
can also become quite bearish. >From the top of the market in 2000 until
early-2003 I will remind readers that I was about as bearish as anyone. We won’t
go into historical precedence of 1929 to 1937 in this article, but based on the
action we are currently seeing and the historical similarities of the Dow from
1929 to 1937 and the NASDAQ from 2000 through present are almost a mirror of one
another.
Enjoy your investing and don’t hesitate to visit the True
Capital web site for a monthly update to our free newsletter and consistent
market updates.
