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In this April 1st article, I wasn't kidding around when I chose less popular stocks over hotly debated names like Google (NASDAQ: GOOG), Apple Inc (NASDAQ: AAPL) and Lehman Brothers Holdings (NYSE: LEH). Because investing is not blogging-the amount of hits, traffic and debate a topic stirs up does not help you make money (in fact it might hinder it considering all the cheerleaders are already invested). Instead, as I often say in posts like this and as I yell to random passers-by on the streets of NYC (for fun), "it's all about the charts, stupid!"
Now, one week later from that article, ask me if I am surprised to see 2 out of the 3 stocks from last week's article-Weatherford International (NYSE: WFT) and United States Steel Corporation (NYSE: X) continuing to breaking out to new highs, with Illumina Inc (NASDAQ: ILMN) "struggling" up only 4% on the week, a few cents off its highs.
So, go ahead ask me ... of course I'm not surprised! Chart reading and trend following-as popularized in print by the great Michael Covel-and on the web by WallStrip-creator Howard Lindzon-really does work. This is just one simple example. (You can stop wasting your time analyzing stocks like JPMorgan Chase & Co. (NYSE: JPM) and Sirius Satellite Radio Inc (NASDAQ: SIRI) that have and should continue to go nowhere!)
The three solid charts that caught my eye this weekend -- First Solar Inc (NASDAQ: FSLR), Massey Energy Inc (NYSE: MEE) and Potash Corp of Saskatchewan (NYSE: POT) (whose ridiculously long name needs to be changed ASAP) are really no different-all of them breaking out, if not all out to new highs but certainly out of recent trading ranges.
Yup, "the breakout" is a very easy-to-understand pattern which is great because you're-not-the-only-one-seeing-it-so-chances-are-good-for-it-to-become-a-self-fulfilling-prophecy, meaning the odds are in favor of others coming in after you, buying and pushing prices higher. Trust me, self-fulfilling prophecies are fun things to take part in, the sooner the better.
Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund
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