It's true that what goes up must come down. But hopefully it won't come down right away. In fact, positive momentum can allow what's going up to rise further before gravity asserts itself.
Big money is made and lost trying to call a bottom or top. The safer bet is to not fight the market, making the trend your friend. This means waiting for a new trend to be established or looking for break-outs into uncharted territory.
On April 9, we looked at fundamental factors to discern the valuation of ETFs, which led us to ask: "Which funds look hot from a technical analysis point of view?"
Three factors were applied to narrow down the huge list of mutual funds to those that may be considered bullish from a technical analysis standpoint.
First, the funds must have reached a new 52-week high within the last five days. Second, the five-day moving average must be above the 10-day moving average. Third, the moving average convergence-divergence indicator had to have given a new "buy" signal in the last 10 days.
We came up with four funds that met this criteria.
The first is the
Aberdeen Australia Equity Fund (IAF). This closed-end fund holds 22 Australian stocks and one New Zealand telco. Aberdeen set a new 52-week high on April 9. In the last five days, several of the fund's holdings had gold stars performances, including increases of 4.11% by
, 6.82% by
, 4.76% by
and 8.44% by
The second fund is the open-end
( UBRLX)Undiscovered Managers Behavioral Growth Fund (UBRLX). This fund picks U.S. growth stocks with holdings distributed between 12% Internet, 11.7% healthcare products, 11.2% retail, 10.3% semiconductors, 9.7% telecommunications and 9% software.
Firsthand Technology Value Fund (TVFQX) searches for undervalued high-tech stocks.
( ESLR) jumping 16.51% in a week, along with 7.53% from
, 5.72% from
and 5.30% from
Sirf Technology Holdings
( SIRF) propelled this to new highs.
( FBRCX)FBR Small-Cap Technology Fund (FBRCX) also met the technical analysis bullish requirements, but since it has a 1% penalty for early withdrawal, the fund is not appropriate for short-term trading strategies.
Please be aware that buying any fund based on short-term technical analysis flies in the face of buy and hold strategies. You need to watch them closely. If any of these funds reverse course and head south, you may have to act quickly to cut your losses. But, hopefully these winners can continue to run.
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.