Today’s tasty delight from the annals of teaserdom is a little bit different from what I usually cover — this time it’s a teaser for a trading service that’s about to launch. It’s a new service from Mike Turner at StreetAuthority that they’re going to call Michael Turner’s Rules Based Trading.
So it’s different not just because the service doesn’t exist yet — he’s trying to sign people up for the “V.I.P.” waiting list to be ready to buy this first pick — but because I don’t often write about chart-driven, technical trading services … largely because I don’t think it’s as interesting as fundamental investing, and because I’m not much of a chartist or trader myself … but also because these kind of trading services don’t usually tease a specific stock.
So I can’t tell you much about the trading system Turner uses — but I can tell you about the stock that he’s saying he’ll probably be recommending soon, the one that is just about to hit his buy price.
He starts us out by telling us about an older trade that had similar parameters: Vanda Pharmaceuticals … here’s the spiel:
“Back in late 2006, this tiny biotech outfit had all of the positive attributes that my data systems are designed to look for. The stock had given a technical ‘Buy’ signal, trading volume was soaring, and both its Sector and Industry were moving sharply higher (among many other things). Although nothing in life is guaranteed, it was as close to a ‘can’t miss’ trading opportunity as I’ve ever seen.
“Shortly after my system flashed a ‘Buy’ signal, shares of VNDA nearly doubled in price, at which time my data models told me it was time to lock in profits. Readers who followed my signals could have pocketed a quick +70% gain as the stock rallied.
“But even better news came just a few weeks later, when my system gave its next — and somewhat surprising — signal. In early 2007, my computer models flashed a ‘Short Sell’ signal on shares of VNDA — indicating that the stock was about to tank. Just days later, VNDA plummeted from its lofty heights of nearly $25 per share, eventually dropping to less than a dollar per share. Readers who followed that sell signal could have made several hundred percent in just a few short months by shorting the stock….
“Bottom line — readers who followed all of my computer model’s recommendations on VNDA could have made a whopping +3,720% in the past three years. Even more impressively, my systems have accurately predicted all of the stock’s major swings, and these gains could have been locked in on a stock that, on the whole, hasn’t gone anywhere during the past three years.”
So that sounds promising, right? Another stock in a favored sector, that exhibits a similar chart pattern etc. etc. etc.? We should at least find out what it is, no?
Of course, Turner wouldn’t be spinning this tale if he hadn’t found just such a stock to teaser. Here are the clues I dragged out of his chatter:
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“… if you’re looking for a potentially great trade today, then there’s good news. Just hours ago, I finished running my proprietary models, and I found a different stock that appears to be setting up perfectly for a trade. In fact, it looks uncannily similar to what Vanda Pharmaceuticals looked like just six months ago (before its recent price surge)….
“Could history be repeating itself? According to my proprietary data systems, I believe it is. Here’s why…
“Trading in “Zone 1”: I look for stocks that have the “least resistance” to doubling. This means I give a higher rating to stocks currently trading in the bottom 25% of their lifetime share price range….
” Recent Technical Buy Signal: …. This week’s pick just gave one of the strongest buy signals in my coverage universe.
“Exploding Volume: …. volume for this week’s pick has more than doubled during the past few months.
“Booming Sector and Industry: Since 50% of a stock’s price movement is directly tied to its Sector and Industry, I look for stocks that have rapidly increasing share prices within both the stock’s Sector and Industry. My newest pick operates in a Sector and Industry that are both on fire, with average share prices having more than doubled in the past few months. This stock could be next in line.
“Strong Fundamentals: This stock has excellent earnings, revenue, ROI and P/E ratings. It’s also based in one of the fastest-growing markets on the planet — India.”
I don’t want to copy and paste Mike Turner’s chart here, since it’s got his fancy ‘ol charting foofaraw on it, but I can tell you that I looked over the chart carefully, and that I found an Indian stock in a hot sector that has a chart that looks like an exact match.
Here’s my version of the chart — it’s a 3 year chart from bigcharts.com, and you’ll just have to imagine the markup … there was an indicator right below $30 (on the way down) when Turner’s system apparently would have told you to sell short, a short covering note for when it cratered down to near zero, and a buy signal as we’ve recently seen the stock get up over $5 or so.
Turner tells us that “I’ll be making the name and ticker symbol of this stock available in just a few short days (as soon as it hits my targeted “Buy” price). But in order to gain access to the full details on this trade, you first need to join my special ‘V.I.P.’ list.”
Of course, loyal readers of the Stock Gumshoe know that you don’t have to join a V.I.P. list (though you can if you want), you just have to read the next paragraph to find out that this stock must be …
Mahindra Satyam, formerly known as Satyam Computer (SAY)
And yes, it’s that same one — the one where management was apparently cooking the books so severely that they announced that all of their recent earnings releases were essentially fabricated, and that they still haven’t figured out how much money, if any, they made in each of the last several quarters (or maybe even years) before the fraud was discovered. So fundamental investors don’t have a lot to go on, because no one has much of an idea of how much money they’re making.
The stock is certainly cheap compared to historical prices, though, and they are still in business. Satyam is one of the leading Indian IT outsourcing companies, up there with WiPro and Infosys and their ilk. After the catastrophe, which dropped the shares by 90%+ over a matter of weeks as the extent of the fraud became well known, the company was essentially rescued by Tech Mahindra and recently adopted the new name, and with it hopes for a turnaround in their reputation. All the PE ratios and such do show up as being miraculously low, but of course no one really knows which numbers are real for those backward-looking measures, and any analyst who’s certain about what Satyam will earn in 2010 has probably been spending a bit too much time in an ashram.
There was a recent article in FT about Mahindra’s efforts to revive Satyam, so it does sound like the business will go on, though of course the level of success they’ll achieve in the short term is anyone’s guess. The Indian outsourcing companies (and Indian stocks in general) have rebounded nicely since the Spring lows), but there are certainly some folks who think that the stocks might have run a bit too far (Infosys, the standard-bearer for the sector in the US markets, has just about doubled from the March lows and trades at a forward PE of almost 20).
If you just follow the charts and trends you may not have to care about why a stock might be in an uptrend, you can just trade it and use your stop loss strategy, but if you want to buy SAY as a company that you want to own a share of because of their growth potential, do be careful to read up and understand the new company and it’s challenges and complications.
So whattya think? Do you like the chart patterns that are apparently leading Turner to tease SAY? Do you think the stock is otherwise interesting (or terrifying?) Let us know with a comment below.