3-27-12 Morning Comments

[Mike]

Yesterday's action created a B7 market buy signal (Accumulation Day). We sit at a maximum of +7 exposure count (for power trend conditions).

Billy mentioned that the enviornment has been ideal for CANSLIM investors. I agree and it has been this way since January. KORS might be setting up as a hight tight flag (HTF). This is the most powerful of all patterns. A HTF is a pattern where the stock doubles in 4-8 weeks (the flag pole) establishes a 3-5 week tight sideways action (the flag) and then breaks above the pattern. These breakouts can result in another price doubling.

The market internals were also strong yesterday when looking at NYSE advance/decline and advancing volume/declining volume. Some know what a Eureka is (described by Ian Woodward). The NYSE internal ratios were large enough for a Eureka condition (very strong market internals). Eureka's early in a market advance are good things. Eurekas late in a market advance can be associated with a blow off top such as we had in October/November 2007. Only time will tell what is going on now.

[jmbarnette]

Mike, or others
In regards to KORS, would you think that the surge in LEV is evidence of strong accumulation? or is this skewed somewhat because of the recent secondary offering, and should be overlooked.
thanks

http://www.effectivevolume.com/_ss.php?pi=images/Stocks/KORS_ev.gif

[jmbarnette]

I apologize in advance, obviously unsure as how to paste a chart in a post

[davidallison@gmail.com]

Mike,

Thanks for the update. I would also be interested in what you think of the secondary offering in relation to what is happening to short term price on KORS.

Thanks,
Dave

[Mike]

Mike,

Thanks for the update. I would also be interested in what you think of the secondary offering in relation to what is happening to short term price on KORS.

Thanks,
Dave

Dave, the secondary offering is large, increasing the float by 25% while breaking the IPO lockup agreement. The current model stock of a similar circumstance is INVN. INVN also broke the lockup agreement and increased the float by 25%. It probably caused the pullback to the 50-day moving average. I don't expect the price to drop to the 50-day in the case of KORS as the secondary offering price is $27. It took three weeks for INVN to shake off the increase in float so that would be my estimate for KORS also. If the market is still acting strong when KORS shakes off the effects of the avalanche of tradable shares I hope for a break to a new high.

I am reminded that the market has been rallying for a long time and all rallies end eventually...

[Mike]

Mike, or others
In regards to KORS, would you think that the surge in LEV is evidence of strong accumulation? or is this skewed somewhat because of the recent secondary offering, and should be overlooked.
thanks

http://www.effectivevolume.com/_ss.php?pi=images/Stocks/KORS_ev.gif

I think the surge in EV on KORS is associated with the buying activity of the secondary shares coming to market and that institutions are the main buyers in larger lots. The fact that EV increased must indicate that the price went up in most buying instances from one minute to the next. I guess this is good but I don't have any experience with what IPOs and large secondary offerings look like on an EV chart. I just take note of the pattern and assume that it is better than if the LEV pattern was dropping instead...