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Monday, 05/17/2004

Recap! (As of Friday, May 14th, 2004)
By Nich Sheldon

The last few months have seen profit taking in the most extreme form. As the markets continue to weaken, the next few months are going to become increasingly more difficult to find quality investments. Some of the profit taking that we have seen has turned into more than profit taking, as the bears have come out of hibernation at full steam. Long term investors such as ourselves, are generally speaking, okay with just putting money into stock every month, as we know that when we retire the money will still be there. The whole dividend payout is just icing on the cake as we get a little something back from the company for investing with them continuously.

It may seem that we have had fewer drip recommendations over the past weeks, but as I have noted before, I prefer to trade quality over quantity and the past few weeks have been more than unstable. In fact, the past 7 out of 8 recommendations have fallen since being picked, and this may appear to be a little discouraging. However, I am a firm a believer that it takes money to make money, and it takes time to make a dime. If I continue to invest a little money here and a little money there, I know it will appreciate over time. I know that my long-term investments really aren't going to be successful in a mere month or two. It takes time. I encourage DRIP investors to keep that in mind.

Have stocks reached their highs? This question has yet to be answered, but one thing is for sure; more 52-week lows are being set than 52-week highs, and this is a trend that is going to continue to happen until we see bulls coming out of hibernation (or at least giving bears a fight).

I may be suggesting that we close a lot of plays today, but I am worried about the market direction as of right now, and would rather take the profit than watch the stock sell-off in the coming months.

As promised I told you that I was going to provide you with a recap of all the recommendations I have made since becoming editor of DripAdvisor.com. I intend to comment about what I think about each recommendation as if I were adding these stocks to my portfolio today. Some Drips may only require a few words of commentary, while others may need a paragraph or two. I am going to add a Dropped section to the Portfolio Updates, so we can get a clear idea of what is, and is not, active. Portfolio Recap:

XEL - XEL is only up $0.60 or 4 percent since its initial write- up. The stock hit its peak on March 23rd, and had we closed it then, we could have gained a total of 21 percent, for a gain of $3.13.

At it's current level I don't really mind keeping this DRIP active. Besides, it is treading around 8-month support as is, and I can't imagine it going any lower, should we continue to see further weakness. Currently it is oversold territory on the daily stochastics indicator, which is no big surprise since it has been selling off for more than two months now. One bad sign I see is that the 10-DMA is below the 200-DMA, which is a sign of further weakness to come. Like I said, I would be surprised to see this stock fall much further as strong support can be found around 13.25. I would wait until the stock can trend back above the 200-DMA for new entries on this DRIP, but don't see any real need to dump it if you already own it. Besides the lower the stock price right now, the more stock you can own with your monthly payment.

TXU - SUGGESTING TO CLOSE - What can I say about this puppy. The last month has been incredible for the stock. It's up sixty percent as of market close on Friday, and had we sold our shares on May 6th we could have captured seventy percent. Either way I am happy with our returns so far, and may take the advice of a fellow colleague of mine, Jim Brown - from www.OptionInvestor.com, and sell too soon. Jim teaches traders how to day trade options, and while selling too soon may be wise for option traders, I am happy to take his advice on longer-term investments, such as this DRIP play. After all, why should I wait to sell my shares when they snap back to their regression channel, which is about half of the total profit level that we are seeing right now? For aggressive investors, I see no problem with continuing to invest in the stock.

LMT - Okay all together now... CONSOLIDATION! Not much can be said about Lockheed Martin. We are basically right where we started when this play was activated. I don't think we will see LMT reach 55.00 (7/23/03 high) anytime soon, so I wouldn't recommend adding this play to your portfolio right now. If you already own it, it's your call. You can watch it consolidate like we have done since it was added, or you can pray for a bullish outbreak. I choose to pray for the bullish outbreak. Either way, I am willing to see what it does for the next few months, and reevaluate it when something significant happens.

BAC - Bank of America may only be up 1 percent, but it continues to ride through its regression channel, even though the market grows weaker. New Drip Investors should wait for the stock to close over 83.00 before making adding any new positions of BAC to their portfolio.

UTX - SUGGESTING TO CLOSE - United we stand, up 17 percent, which is 20 percent lower than the February 20th, 2004 high. I am worried about UTX's future and would recommend that no new entries take place by new readers. UTX is floating around six- month support as well as the Float Turnover Channel (50) Lo Bar (currently at $82.31). The problem is that I don't see any real support for UTX right now and instead of waiting to see where support may or may not find itself, I would rather take the 17 percent and have that be that.

MRK - Merck sold off almost the same day I recommended it. I kept it on hoping that it would finally find some support and return to its channel. With that said, the bottom wasn't found until the end of November. Since then however, the stock has been trending through a wide range regression channel, and yes, this regression channel is not descending - GRIN. The good thing to keep in mind is that if you paid the minimum of $50.00 every month, you would be buying one full share as opposed to a percentage of the share. Sometimes it's better to be optimistic. While some of you may think that I am crazy, I am not opposed to keeping MRK on as a dividend reinvestment, since it has finally began to show signs of a bullish regression channel.

MCD - SUGGESTING TO CLOSE - Up 22 percent since being added, which is down from March 5th's close of 29.85, or 40 percent. The stock has spent the past month under its regression channel and I am going to suggest that we close the DRIP out and walk away with our 22 percent.

INTC - SUGGESTING TO CLOSE - Ouch. The stock is only up 8 percent right now, and it was up 36 percent at the beginning of the year. This another prime example of not selling to soon. INTC has been consolidating for three months in a three point hi/low range. The Stochastics Indicator has the stock in overbought territory on the daily chart and while the MACD indicator has the stock on a buy signal and I not expecting to see any notable strength in the coming months. Tech stocks continue to fall lower and lower, and I would be happy to take some profit from Intel while it still exists.

WMT - SUGGESTING TO CLOSE - Wal-Mart is basically at a break-even level right now. I don't see any real potential in bullish activity, so I am going to suggest closing the DRIP. If I see a solid regression channel form, as well as other technical indicators giving off buy signals, I may spotlight this stock again shortly.

JCP - J.C. Penny has been one of those Kodak moment type DRIP investments. A month or so ago we were up 81 percent. Over the past couple weeks JCP has fallen out of its channel. I can either hold this or dump it at this point. If I see JCP close below 31.00 I am going to cash out, if the stock floats around its current level and returns to the July 2003 regression channel, you can bet I am going to continue to invest monthly.

HD - Like so many other stocks in the past weeks, Home Depot has also fallen out of its regression channel. If it wasn't for a couple pops lower last week, I would have thought that this home supplies company had flat lined. HD is only up 5 percent and it doesn't look like we have much to look forward to in the coming months. However, last week, the stock closed in the green Monday-Friday. I am going to suggest that we close the play on a close below 32.00, until then... this DRIP is still active.

CEG - Constellation Energy Group is $0.05 over its initial write- up date. The stock may have fallen out of it's channel a month ago, but I see nothing wrong with keeping this DRIP active.

KO - Coca Cola is one of the few stocks still inside of its regression channel. KO may take a long time to gain a point or two (up 14 percent in 8 months), but until I see a close below its March 2003 regression channel I am keeping this baby active.

IBM - SUGGESTING TO CLOSE - Big Blue is starting to make me feel bluer and bluer (if bluer is a word? - GRIN). I mean in February (OF THIS YEAR MIND YOU) the stock closed at 100.19, and here we are 3 months later down 14 points, or 5 percent. As of market close Friday, the stock is just under the bottom of its regression channel. I am going to recommend that we close the stock out for a loss of 5 percent. Like I said earlier, Tech stocks are extremely weak right now, and this stock is already so expensive that I don't see any point continuing to invest in it. Who knows, I may spotlight IBM again should we see a bottom form.

XOM - Exxon Mobil is up 18 percent, trending beautifully between its middle and upper bar of the January 03 regression channel. There is nothing new to note here. Oh... how about those rising gas prices. Absolutely dreadful isn't it?

CAT - Man we were off to a good start with this recommendation. Just a month ago, CAT was 9 point higher than Friday's close. The stock did close higher for the past three sessions, but I am concerned that it couldn't scratch and claw its way back over the 200-DMA. This is a serious sign of weakness. I may wait to see if the stock closes below seventy before deleting it from my portfolio, but until then it's still active.

SCH - SUGGESTING TO CLOSE - Down, down, down, Charles Schwab is going down. SCH has been falling so fast it's amazing that shareholders haven't sued for whiplash. Since January's peak the stock has been trending lower in a tightly wound descending regression channel. I actually might like to buy some put options on this play as I see further weakness in the stock. If you are unaware of what Options (Day Trading) are, I would recommend visiting www.OptionInvestor.com for a free two week trial. Anyhow, I am not recommending that new readers invest in the stock, unless they are just investing in it for the simple fact that it is cheap. From time to time I don't mind throwing cash into something cheap, just for the simple fact that if I make the minimum payment, I am still buying whole shares.

VZ - SUGGESTING TO CLOSE - Verizon is up nine percent but has fallen out of its regression channel. The stock is still over its 200-DMA but not by much. If VZ closes below its 200-DMA, currently 35.47 (less than a point away), I am going to suggest that we close this play as well.

PX - Praxair is using its 200-DMA as support and further strength to crawl back into its regression channel. As of right now PX is up four percent and still active.

ZION - This bank corporation is having trouble breaking out of its consolidation pattern. On Friday it managed to close over its 200-DMA for the first time in more than 2-months, but only by 2 cents. I am not to concerned with seeing it fall under 54.00, or strong support, so I am going to suggest that we keep this one active.

BDK - Black and Decker is up more than 20% and still active.

NOC - Is up seven percent and still surfing through its channel.

NKE - Nike looks to be making a reverse Nike Swoosh, as it bounced off of the bottom of its regression channel. I was concerned that the stock was going to collapse below this bottom bar and through its 200-DMA but it appears that it is going to be using its 200-DMA as support for further bullishness. To call the past 19+ percent sell-off a profit taking session would be inaccurate. In all actuality it was just plain nasty to watch the stock trend through its entire channel. I think we are back to square one on shares of NKE and would not see any problem with new readers making new entries at this point time. However, I would be worried should Nike close below its 200-DMA, which is below its channel.

EL - Estee Lauder is still active and showing signs of further bullishness.

LOW - SUGGESTING TO CLOSE - Lowe's has not been performing as expected. I am going to suggest that we close out LOW for a loss of 8 percent.

PEP - The next generation of cola's is performing beautifully. I'm going to keep this DRIP active, as I anticipate that the middle of the regression channel can hold up as support as it has for the past three and a half months.

TAXI - SUGGESTING TO CLOSE - So much for taxiing into the New Year. TAXI has continued to fall since being listed, albeit it's only a few pennies a week. The bad thing is that TAXI closed below its 200-DMA this week and shows no signs of getting back to its regression channel. I am going to suggest that we close this bad boy for a loss of $1.34, per share.

NDSN - Nordson is down six percent but still surfing through its channel. While the stock has been consolidating for a while, I see no reason to discontinue further investments in their stock.

WTNY - Whitney Holding Corp is still cruising through its channel, even though we are practically at break even prices. There is no need to close this play out as we have really had any time to see where this stock is headed. If the regression channel holds up as support then we are still on track to seeing positive returns.

BOL - Looks solid, up 14 percent and cruising through the channel. While the recommendation is looking good, I would not recommend any new entries at this time.

SJM - Smuckers is up seven percent and hoovering around its 100- DMA. I am hopeful that the channel will hold up as support if the 100-DMA doesn't. No new entries are recommended.

DOW - Dow Chemicals have been in a bearish slump since the end of last month. While the channel has been broken and the trend looks ultimately bearish, I think that the 36.00 level should hold up as support. I am not recommending any new positions at this time, but for those of you who are involved with the DRIP, I am not too worried about DOW reversing out of its oversold Stochastics indiactor, and its month long bearish signal on the MACD (daily chart).

FLO - Down seventeen percent and not looking like its ready to break out of its current funk. Personally I feel like FLO could turn around from it's current bottom of 21.13, but I am not too positive on how fast this will happen. It may take a while to make-up ground, but I suppose that is the beauty of the type of investments we make. On a positive note FLO's MACD indicator is starting to show signs of a curl, or rather a tail-up attempt at bullish crossover, which has already occurred on the stochastics indicator..

I am not updating any of the tickers below due to the fact that were written up less than three months ago. JP, FO, MAS, WMI, HAN, ITT, FMBI, BDX

This ends an exciting episode of the DripAdvisor.com Drip Portfolio Recap.

Until Next Week,
Nich Sheldon
Editor

 
 

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