The end of a great trend

My favourite aspect of trend-following is that forecasting is not required. The name of the game, literally, is to follow. Rather than predict and hope the goal is to watch and respond. During the last two years the market has offered up some great trends and I was fortunate to ride a few of them. But of course, even the best trends come to an end.

Back in February I reviewed some of Jesse Livermore's sage advice on staying with the trend in a bull market (This is a Bull Market you know). At the time I highlighted three pieces of evidence, none of which are still true. Prior to that I had mentioned that I was watching the financials as they were on the verge of a Weinstein stage two breakout. That obviously didn't follow through, and they broke down instead. All this is to say, we are not in a bull market for stocks anymore. I'm not saying anything new here, but it is for the sake of the archive I suppose.

Fortunately, trend-following is designed so the trader doesn't need to forecast the end of a bull market, nor the beginning of the next one. Trailing stops and regularly watching the market of stocks are the tools of the trade. As Alexander Elder said:

"To make money trading, you do not need to forecast the future. You have to extract information from the market and find out whether bulls or bears are in control. You need to measure the strength of the dominant market group and decide how likely the current trend is to continue."

Here are several charts from the past bull market that had nice runs. The up-trends are gone. The stop-losses were triggered.  The stocks charts are broken. It will take a long time for these stocks to set up again, if they ever do. In the meantime, this quote from upsidetrader seems appropriate (time-frame notwithstanding):

"Stocks are like taxis, another one will come along in five minutes"

Fossil (NASDAQ: FOSL): a consistent guest in the all-time high list. Also one of the few stocks with a Piotroski score of 9. 

Acme Packet (NASDAQ: APKT): what can I say, a beauty. It reminds me of Potash Corp back in 2008.

 Edwards Lifesciences (NASDAQ: EW): a really smooth trend and low correlation with the S&P500.

Computer Modeling Group (TSX: CMG.TO): an obscure Canadian stock that just stair-stepped higher. It's still trying to hang in there, but the chart has lost its shine.

Having said all that about stocks, there is still a raging bull market in physical Gold (not as much with the miners). It too may end someday, but for now the trend continues higher.

I also learned to stay out of bear markets unless my stocks remain in their boxes or advance. -Nicolas Darvas

Related Posts

• Priority List
• Fossil - FOSL
• Edwards Lifesciences - EW
• Computer Modelling Group - CMG.TO
• Van Tharp on Stalking Your Next Trade
• Trend-trading Potash Corp 2006-2008

FOSL - Fossil Inc - Breakout to All-time high

As I've mentioned before, the reason I watch the all-time high list is to focus on the best stocks. In addition to price action I also look at indicators of a sound business and high growth. There are only a handful of stocks with top scores in all three categories and FOSL (Fossil, Inc) is one of them.

You can see that FOSL has a Piotroski score of 9 (the highest possible score) an Altman Z score well above 4, and EPS and Sales growth above 25%. This makes FOSL a good stock for long-term trend-following.

Fundamentals, Growth, and Institutional Support
Symbol	Sector	F score	Z score	Market Cap	EPS Q/Q	Sales Q/Q	Div.	Pay out	Inst Own	Inst Trans	Target Price
FOSL	Consumer Goods	9	11.6	4.44B	92%	37%	%	0%	79%	-4%	76.9
A high Piotroski F-score indicates financial strength, and a low Altman Z-score predicts bankruptcy  Data are from GrahamInvestor.com, Yahoo Finance, and Finviz.com

The chart is great. It has 'boxes piling up like pyramids' as Nicolas Daravs would look for. Long enough pauses to let the RSI cool down, and above average volume on the breakout above 70.00.

I personally couldn't care less about their products, but the market doesn't care what I think. They are very effective at branding and delivering results.

www.fossil.com: The heart and soul of the FOSSIL brand – its people, products and culture – is about a unique kind of inspired creativity. Representing the concept of accessible cool, Fossil’s identity is anchored in vintage authentic style mixed with a creative spirit and a sense of humor that extends into all its product offerings, graphics and one-of-a-kind, trademark collectible tins. Fossil creates modern yet vintage products for everyone, a simple yet compelling idea reflected in the Company's tagline, What Vintage Are You?TM

I then sat back and re-defined my objectives in the stock market: 1. Right stocks, 2. Right timing, 3. Small losses, 4. Big profits -Nicolas Darvas

Related Posts

• US and Canadian All-Time high list
• Why many Investors Lose Money
• Why all-time highs outperform
• Watchlists are useless without Action
• Trade with Focus
• Trend-trading Potash Corp 2006-2008