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"Stocks in the Spotlight"

Published since 1990
"Equity Strategy Specialist"

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August 22, 2018

"Stocks in the Spotlight's"

A CURRENT UP-DATE

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"THE MARKET"

The Economy Is Screaming - Expect It To Continue


Last Week's Closing Indices

52-week Index highs

52 Week Highs

The Markets Are Still Quite Bullish!

My Best Guess
would be the markets are going to continue moving up and down, with a leaning to the upside, until the Mid-term elections in November. Having the Value Line & SPREAD hitting new all-time highs is one of the most bullish signs we might hope for.

If the Democrats regain the House we will need to get out of the markets as fast as the Flash, however, if the Republicans hold on, and possibly gain seats in the Senate, the markets will climb at rocket speed, and possibly all the way to the end of the year, and then some.

Our problem is still the same either way. Are the markets capable of climbing enough to make buying here worth the risk? If they keep moving sideways any gains will be slight and the current overpriced ones will become even more overpriced.

However, if we don't chase the big winners, but find a value stock instead, a lot of money can still be made. There is little reason for a major negative globally until November. Possibly increasing interest rates, tariff's and a trade war could slow down the markets but this has many unknowns and all tend to favor the good ole USA.

The newest problem would be the new tariffs and possible trade war, but no matter how it turns out the US will come out on top, simply because other countries have been taking advantage of the US for decades and it is going to stop.

People are worried that the tariffs will stop the big growth we have experienced lately. Maybe in the beginning but we closed our factories and stopped making products we needed right here in good old USA and started buying elsewhere.

Now follow me on this one. If other countries decide to raise their tariffs on us, and they do so, it will simply force our country to start opening factories here at home where we won't have to worry about a tariff and won't have to sell them anything. Buy American will only grow.

What happens next is the foreign country that overcharged us will no longer be able to sell us anything because we will be making it ourselves, therefore, I believe many of countries will drop it's tariff on us early in the game in order to continue doing business with us.

Already we have heard about a steel manufacturing plant that has canceled a new factory in China and will be building it in the US instead. Also, we heard about a steel manufacturing plant in the US that is reopening. Soon we can buy steel from our own companies and never worry about any tariff.

I believe the return to manufacturing here in the USA will lead to an explosion in new jobs that could last a long time and the markets could easily continue to climb with the ever increasing economy.


Since I believe the big OTC stocks tend to lead the markets, the new highs on the SPREAD & Value Line should mean higher ground ahead. As long as the VL & Nasdaq fair better than the NY the rally should still be on track. Its when the NY starts doing better then the VL & Nasdaq we have to worry.


My rule is: The markets cannot rally very long without the big OTC stocks.

The DOW 30 chart below is an average of all 30 of the Dow Jones industrials and what percentage the total are away from the 52-week high. I use it as a measure of when markets are undervalued, or overvalued, simply because these 30 stocks are carried by just about every fund there is. Keep in mind, since it is a discount, the percentage can never be in positive territory.

The record for the discount to the 52-week high is - 2.87% reached on 1.8.2010. The maximum discount was  -52.76 on 11.20.2008 showing just how far this index can move. Currently the discount rate is -8.43%, meaning there is quite a bit of "wiggle" room to continue improvement, but the nearer the average of all 30 stocks come to the 52-week high the more overvalued they become. In 2016 there were 24 that reached a new 52-week high, 25 reaching a new high in 2017 and 26 so far in 2018.

This discount had been trading mostly between -9% and -13% so far this year, with a breakout to more than -13% about 2 times.


Remember, once an index or stock sets a new high the next new high is easier to achieve. It only has to break the current one by 0.01%. Also, Once the previous 52-week high expires it is easier to set a new high. The DOW 30 has set a new high more than 100 times since the election.

The fear of losing profits will be the reason forcing the markets down rapidly, which in an overvalued market is, and should be, expected. Nothing goes up forever, however the new tax cuts for corporations will make a big difference in valuations and provide much fuel for the bull to keep charging.

The trend is our friend and it appears to be leading the markets on a roller coaster ride through the last few weeks of the 2nd Q and continuing through July and August. The markets could continue this way all the way to the November elections, but if the demo's win Congress get out because the drop will be hard.

We need to keep our cautious shoes on and tread through the bargains. Look for the deals and look at newer and start up companies and do the homework.

A best bet might be a small stock that reads good and offers a decent chance.
Small stocks tend to trade on their own and are not as sensitive to the overall market. It needs to be trading near the low-end but with a reason to climb.  Again, they are out there. We just have to search hard to find them.

Good Luck!

JR Budke


"SMALL STOCKS"

May Be The Best Place To Be



  Considering the markets are trading so high Small Stocks might be the better bet!

Big money can be made on low-priced stocks, unfortunately finding a good one is harder than finding a new gold mine, quite a bit harder. There are more scams in low-priced stocks than Carter has Little Liver pills.

If we dig 100 gold mines we will probably find something, but if we look at 100 penny stocks we will be lucky to find one that is worthy of further research. This tends to be my story. Still, it is worth the time because once we discover a good one big money can be made.

Two very important things we need to know is the history of the price and the amount of shares held by the public (float). Also we need to glance at the total outstanding shares because this includes the insiders.

My rule is if the outstanding is over 100 million shares close the books on that one.  Since small stocks move because of "supply & demand," if there is too much supply the stock will fall.

The rule is that "volume is King" but this does not necessarily mean big volume. Big volume in the wrong place, or time, or both can be very bearish. A good example would be a penny stock remaining at the same price for a long time but trading strong daily volume would be telling us that the market makers (floor specialist) have "enough big sellers to handle all the buyers."

Anytime a stock trades heavy volume it will move up, if buyers, or down, if selling but it should not stay where it has been staying.

I have never seen a market so strong with so many big stocks trading so high as the current one. This is where "trickle down" economics comes into play as we trickle down to smaller stocks.

I am currently looking at several small stocks, but finding it hard to find a "winner" and as soon as I come up with what I think is a "real deal" I will let you know


UPDATES

From $0.30 to $5.00
Powin Energy - (OTC-BB) (PWON) (52 week range 0.30 - 5.00 )now at $1.80. A leading manufacturer of fully integrated energy storage solutions is a company with a future. The stocks has low volume and keeps bouncing higher and falling back. Money can be made here if we have patience. Just not an exciting stock but a great product.


From $1.75 to over $21.18
Advanced Micro Devices (AMD) (52 week range 9.04 - 21.18 )now at $20.84. AMD has been a big winner from our original buy at $1.75. AMD increased estimates for the Q and the stock has been hitting new highs. Its hard to buy after such a big move but strong news combined with a strong economy could keep this one climbing. We could see over $28 yet this year.


From $0.27 (4.16.2007)  to over $33

Fonar Corp. (
FONR ) (52 week range 17.20 - 33.90), now at $26.30. I first started following Fonar in 1982 and have followed it every day since. Great products would be the reason to own this stock. The current PE is only 10.52.

Fonar has been a favorite of mine for over 30 years. A strong growing company with an unusually low P/E ratio in the medical product industry makes this company of it that for anybody. The problem is the stock is trading to near the high and has a habit of easing back down again,with support between 24 and $25.

No matter how much I like the stock near-term entry is best if under $25 with a move to $33 possible this year.



Up From $22.10 to over $35 since February

Comtech Telecommunications ( CMTL ) (52 week range 17.11 - 35.97), now at $35.67. CMTL is a stock to own for the long term.

The only buy area that I like right now would be the $22 support level with the stock to high for entry at current levels, although the stock is on a steady up trend and a continued strong market would lead to higher ground, with my target near $40. The current PE is 28.81.



In closing I would like to mention that one of the worst things we can do is buy stock in a young penny stock company that has already issued, or is going to issue too many shares too low in price.

The market makers love too many shares as it keeps the price low making it possible to short millions of shares, which prevents the stock from moving.

Finding a quality small stock "to buy" with not too many shares owned, near the low, will be very hard but once found the rewards can be plentiful.

If you have a situation, or questions, please feel free to contact me.

I wish you all good luck!

Remember, if in the right stock at the right time
the market direction will mean little!

I'm J.R. Budke and this is my opinion!

Stocks in the Spotlight
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J.R. Budke became a stock broker in 1981, an options principle in 1982 and a branch office manager in 1987 and a National Sales Manager over 150 stockbrokers. He is currently inactive as a stockbroker as of 12/31/99. J.R. writes the articles and opinions for the Stocks in the Spotlight. The stories and stocks found on this site, or any "Stocks in the Spotlight" written material, are the opinions of J.R. Budke unless other wise stated, and should not be considered as advice. You should not purchase any stocks solely on the opinions found on the "Stocks in the Spotlight's" web site or in any of its written material. You should also be aware that options are not for everybody and carry a high degree of risk.

The "Stocks in the Spotlight" provides information only, this is not meant to be a recommendation to buy or sell the profiled security, nor is this an offer to buy or sell the security.
The publishers of "Stocks in the Spotlight" are not investment advisors and are not acting in any way to influence the purchase or sale of the security. Before purchasing or selling any security profiled, it is encouraged and recommended that you consult a stockbroker or other registered financial advisor. The reader must understand that the companies we select may involve a high degree of investment risk. Potential investors must understand that they may lose all or a portion of their investment due to the risk involved.



The recommendations and updates in this "Current Up-Date" may include "forward- looking" statements as that term is defined in the Private Security Reform Act of 1995, & therefore are subject to various risks & uncertainties. There can be no assurance that actual results, business conditions, business developments, losses & contingencies, and local & foreign factors will not differ materially from those suggested in the "forward-looking" statements as a result of various factors, including market conditions, competition, advances in technology, acquisitions, potential litigation, personnel changes, capital availability, and all sorts of other factors.