How have my 2010 picks done so far in 2010? Well, two of the three are
, while the third is stuck at the same price it traded at when I made my not-so-bold proclamation. In baseball, a .667 average would get me into the record books but in high school, my 67% average would probably mean junior college instead of Yale.
made my short list
in a Dec. 17 video, although I had warm feelings for another dozen stocks at the time. I also had cold feelings for health care stocks, including
I recommended for short sales on Jan. 4. Those predictions were a complete bust, unless you covered short positions in early February.
I bought Apple at $191.54 on Dec. 7, 10 days before my video recommendation. The purchase turned out to be perfectly timed because that session marked the lowest low in the stock in the last four months. Of course, we all know what happened next. In any case, my position is now up more than 26%.
I have no intention of selling Apple in 2010 or 2011, but that doesn't mean I expect it to go straight up from here. Instead, I believe the rally is getting long in the tooth, with the stock setting up to retrace the gains posted after breaking out above the 2007 high in March. That decline could carry price all the way back to $200 or $210.
That's why, if you own this hugely popular stock, now is a good time to look in the mirror and decide if you're a long- or short-term shareholder. If you hate drawdowns and are still kicking yourself for sticking around too long in 2008, get a stop loss under the position and take profits when price rolls over and cracks a few support levels.
If you're in for the long term and faithful to the Apple story, be prepared to lose 50% or more of your 2010 profits before the stock finally turns around and heads toward $300. As I've noted several times this year, I think the stock will split later this year or in 2011 (despite denials by Steve Jobs). I hope that happens before the stock begins a long corrective phase, but it probably won't.
I bought IBM in April 2009 at $99.99 and am still holding it. I recommended the stock in December when it was trading at $127.40, or about a point and a half under the most recent close. That fine for me, because I'm up 29 points in the last year, but positions taken just after my recommendation haven't done that well, despite a huge
But I still love IBM because the long-term chart looks like its setting up for a massive breakout over the 1999 high at $138. The stock came within 4 points of that critical price level in January and has been moving sideways for the last three months. To me, this is bullish action that might foretell a rally over the magic number.
A Dow component jumping to an all-time high is a big deal, especially when it takes more than a decade to reach that lofty level. In a nutshell, I think this iconic stock can run like crazy after it rallies into the $140s, setting up an excellent reward/risk profile that could enjoy 30% to 40% upside in 2011 and 2012.
Still, it isn't wise to jump into a new position here because buying a $130 stock at resistance can get you into big trouble. Instead, watch price action in response to IBM's April 19 earnings release. This confessional has triggered volatile selloffs in the last two quarters. Thinking contrary, a rally after the report might offer an actionable buy signal.
Finally, we come to Ford, a stock I owned, loved and sold in 2009. Although I took profits in anticipation of a re-entry at a lower price, the stock decided to up and run without me, gaining more than 22% since the start of 2010. However, the rally stalled at $14.54 in March, giving way to a furious bout of distribution in the last month.
There was a remarkable debate on the value of volume analysis in Monday's Columnist Conversation. I fell into the skeptical camp that limits volume study to price action right near new highs and lows. That's why it's impossible for me to recommend Ford as a new purchase right here.
My favorite accumulation-distribution indicator, on-balance volume (OBV), fell off a cliff after the stock turned lower in March. This rollover points to institutional selling pressure that favors a corrective phase lasting three to six months. As a result, I expect the stock to move lower into the summer, perhaps hitting the 200-day moving average, currently at $9.60.
This is a fabulous stock, but if you're on the sidelines and looking for a new entry, now isn't the right time to jump in. Consider this: Ford is trading less than 2 points above the level posted when the
debacle hit the news in January. Its failure to go vertical after its primary competitor imploded tells us the stock is overdue for a rest.
Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.
At the time of publication, Farley was long AAPL and IBM, although holdings can change at any time.
Alan Farley is a private trader and publisher of
Hard Right Edge
, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of
, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in
. He has written two books:
, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.
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