Stock Watch - CFC
(June 29, 2004)
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before reading the following information.
Be sure to utilize a hard stop in each trade that you make!
Please note that any
trader who bought into ALDN and CADA should have their long positions stopped
out by now. The market for
momentum stocks currently does not look good – we will reevaluate once the Fed
meeting is over and done with tomorrow afternoon.
A “diversified” mortgage services company, Countrywide Financial defied all logic
and expectations during its more recent run into the stratosphere – even as
other mortgage companies and homebuilders took a dive from their all-time
highs. The stock has also been
consistently in the IBD Top 100 ranking of momentum stocks for the longest time
– suggesting that most of its recent run to its all-time high has been about
momentum more than anything else.
The stock gapped down today after Washington Mutual released an earnings warning
earlier this morning – suggesting that the recent slump in mortgage lending is
finally taking its toll. Please
note the continued decline of the stock after the last downside gap in early
April (see daily chart below).
Momentum investors better take heed. The author’s guess is that we are finally seeing a letting
out of the housing bubble in various parts of the country – a full four years
after the top of the DJIA and the NASDAQ (thanks to Greenspan). New home buyers should also take heed.