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Waiting Out the Fed Storm


When the path has been carved, we can move along without getting stuck in the brush.


Good morning, Minyans,

I expect to lay low ahead of the Fed or even after today, simply because I think before will be a gamble and unless it does something very surprising, after may be too quick to determine the real market response. So rather than present you with some grandiose thesis, I will relay that the best course of action at this juncture is patience and more patience.

I am very much looking forward to getting the FOMC out of the way so we can go back to trading as usual. As we continue to wade through earnings season, many of the small, undiscovered companies are reporting and I am building my list of future prospects. This will typically be my trading list to work with as I move through the end of the year. In addition to the ones I have already mentioned this week, Art's Way (ARTW) and Charles Schwab (SCHW), I have a few others high on the list.

Abaxis (ABAX) recently reported a 30% jump in EPS and a 20% jump in revenue and with a 2006 estimate of 0.66, which is 33% growth, the company still looks attractive despite the sharp jump on the earnings release. Furthermore the technical action is stellar as the stock broke above a multi-year channel started in early 2006. I was fortunate enough to snag a few shares on the report and have been waiting very patiently for this current dip. I am going to start adding to my shares slowly and methodically, giving this earnings winner some room and time to work.

Magma Design (LAVA) is another I like quite a bit after the company reported a 150% bump in EPS and a 27% jump in revenue. This little guy has a 2008 estimate of .53, which is a growth rate of 112% despite the forward valuation of roughly 29. The stock has been trying to break above a down trend started in early June and is ripe for an add over yesterday's high of $14.83.

There is no shame in waiting things out today, or resolving to do nothing at all. Don't fall into the trap that you must possess some master trading plan when not a soul knows just how the day will unfold. Take it slow and let others do the heavy lifting. When the path has been carved, we can move along without getting stuck in the brush.
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Positions in ARTW, SCHW, ABAX, LAVA.

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