Greetings, fellow Pro-fundity team members -
12-29-00 Page Background music:

A. This weeks picks (remember the basis of our stock picks: a) sound fundamentals, b) supportive technicals, c) possible near-term buy, and d) positive news):

• (EFX) [Diversified Services - Business/Management Services] Equifax, Inc.
• (HDL) [Wholesale - Basic Materials Wholesale] Handleman Co.
• (KDE) [Diversified Services - Consumer Services] 4 Kids Entertainment, Inc.
• (LAB) [Financial Services - Investment Brokerage] LaBranche & Co. Inc.
• (MLI) [Metals & Mining - Steel & Iron] Meuller Industries Inc.
• (MXT) [Financial Services] Metris Companies, Inc.
• (SFI) [Real Estate - REIT - Diversified/Industrial] iStar Financial Inc.
• (SFP) [Consumer Durables - Appliances] Salton, Inc.
• (SKX [Consumer Non-Durables - Textile, Apparel Footwear] Skechers U.S.A., Inc.
• (WCBO [Banking - Regional - Pacific Banks] West Coast Bancorp

B. Quick Picks

We have added five low-cost price charts for subscriber interest. These have good technicals and have passed the news scan, but the subscribers must do their own fundamentals research.

C. 100 Optionable Possible’s

The link on the home page to 100 OPTIONABLE POSSIBLES provides a list of tickers with interesting price patterns, all optionable between $5.00 and $15.00, that merit your consideration. Any fundamental, technical or news screens are left to the subscriber.

D. Breakouts

In our weekly search for tickers that present a rolling opportunity or a pending price up-tick, we continually bump into companies that have already demonstrated strength via price increases with increasing volume. Our experience with this category is a high likelihood of further price increases. To share this opportunity with our subscribers we post each week five such tickers, taking advantage of current momentum to capture future gains.

E. This Week's Guidepost

A Year’s End Review and Fireside Chat, Continued:

1. Last week we highlighted some of the difficulties with the conventional “Resistance/Support” philosophy with “Rolling Stocks.” First, buying when the price decreases to a “Support” level leaves us in a position to own the stock whether the price goes back up or not. What are the odds? A rolling stock is in a “trading range,” that is, neither in an uptrend or a downtrend. It is a period of indecision, a time when the market is deciding how to value the stock. In our experience, good rollers last five rolls or less. That means by the time we spot a roller, it has probably rolled half of its rolling life away. How many rolls are left for us to capitalize on? We offered BARZ as a pick on May 7, 1999. It had a couple of $4 to $5 rolls before it was picked. The marker shows where it was picked, at the bottom of the roll in early May.

   

2. Its price on that Friday was about $14, shooting up to a good $16 a month later. Roller pundits would shout, “Hey, a $2 return on a $14 investment in one month. That is a 14% return in 30 days, annualized 171% APR!!” With those kind of returns the rolling strategy can’t miss. Look at the next chart.

   

3. We see the next roll bottom in September or October, with another $16 sell in November. $2 return on the $14 investment, another 14% return. That only equates to about 30% APR this time since we didn’t have the money working for us during the months between the last sell and the most recent buy. The point in this chart is the possible return had we held our position until December; 221%! Let’s call this the SBR problem (Sell Before Ready). The second issue we must consider, BTS (Buy Too Soon). The next chart is such a case:

   

4. In this case, any buy, thinking we were at the bottom of a roll, doomed us to a loss. This punches up the two hazards of the conventional “Resistance/Support” rolling strategy; SBR & BTS! I raise these issues to help readers understand the mindset in which the Pro-fundity page is put together each week. We must recognize these hazards to optimize our strategy, minimize the downside, and maximize our bottom-line returns. Please note: This is not to bad-mouth rolling stocks! This is to obtain greater returns by modifying the rolling strategy. We believe in rolling stocks as the next chart demonstrates.

   

5. This ticker was offered on April 14th this year. Selecting a support at $4.20 and resistance at $4.50, we got the following:

   

6. What we see from the chart on AAI is a sound rolling pattern providing a healthy return. The point of this dialog is that we needn’t give up the ship when the price refuses to go back down to support. And this is the operative message; Use the rolling stock philosophy when it works but remain flexible to “Let profits run and cut losses short!” Let me insert another of our picks (4/14/00) which illustrates a segment in the life of a roller (remember, all of our picks are chosen with good fundamentals, those with a high likelihood of increasing in price). DIAN came up on our radar screen in early March as a potential pick. We followed it and made the pick at the marker when the price was at $16.50. Its price had dropped to $16.00 on March 3rd, which prompted us to look for another “support” drop in the $16.50 range. The “resistance” level we looked for on the up-side was about $20 which was reached on May 8th at $20.15. Everything seemed on track. An intra-day low of $16.00 was met on May 15th furthering our rolling strategy. But from here on, the price shot up beyond our $20 “resistance” peaking at $47 on September 5th where it began another rolling pattern. It may be of interest here to point out a recurring price pattern with many rollers. In both the February-May and September-December rolling patterns, a “Triangle” appears. That is, in both cases the highest highs and lowest lows occur at the start of the rolling pattern. As time progresses, the highs are less high and the lows are not as low. This certainly has an impact on our use of the rolling price pattern to fatten our pocketbook.

   

7. It is the mission of the Pro-fundity page to help subscribers synthesize their own trading strategy. This is a two-fold effort; first, education in the use of techniques to recognize when to switch (see the order page for our book offer which details these methods). Secondly, to provide a data-base of low price volatile tickers to exercise on. This may be via paper trades or by actually investing real dollars. One thing Pro-fundity is not: we are not an advisory service, telling you what to do. You must invest your own money and take the responsibility for your actions. We tell you what kinds of features to look for in the purchase of a good used car. We outline a checklist for your use, we line up a bunch of autos each week for you to look under the hood, kick the tires, test drive with your honey, but it is your money and your choice. You can pay for this kind of advisory service, but be prepared to pay many times the Pro-fundity subscription price. We believe you are better able to take care of your own financial health than anyone else. Who cares more about it?

8. We will continue with our review of what the Pro-fundity page offers from a subscriber’s viewpoint in next week’s Guidepost. Enjoy a happy and safe new year.
   Understanding:

   It is our intent to help our subscribers understand market strategies well enough to make informed decisions and understand the risks.

   TC-2000 tutorials are available on the home page.

   Be diligent...
   Take action!

   

   
   
   
   
   

   
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