Hello again!

In spite of the poor market conditions, we had a very good meeting last night. I realize not everyone can attend so for the benefit of those who couldn't attend I'll try to summarize the general points.

With the market in correction any new buying should be kept to a minimum. Most breakouts fail to make much progress when the broad market averages are trending down. Eventually we'll see a market rally that will get a kick start when one of the major averages follows through. We're coming to the end of the second quarter so window dressing has been going on. Earnings season is upon us and that's a possible catalyst but generally it's not a good idea to buy stocks just ahead of their earnings release.

If you want to learn how to read charts more effectively, Pat correctly suggested to study the IBD 100 each week and look at the one line comment below each chart. There's no better way to read charts than to study them. Read the chapter 12 in "How to Make Money in Charts", the "Base Reader" column in the IBD and the online study courses at investors.com. Becoming an effective chart reader takes time. As you get more accomplished, try studying the IBD 100 charts and predicting what the comment will be below the chart. That's an excellent way to improve your skill and keep you focused.

Pat discussed a custom chart he called the "40% Earnings Screen". Remember CAN SLIM calls for a MINIMUM of 25% EPS in the last quarter and 25% sales. The top performers generally show much higher EPS in the most recent quarter. Remember, in "How to Make Money in Stocks" O'Neil pointed out that in a study of the 600 best performing stocks from 1952 to 2001, three out of four showed earnings increases of over 70% in the most recent quarter BEFORE the breakout. The remaining 25% that did not, had quarterly increases averaging 90% in the quarter after breaking out.

40% Earnings Screen

Relative price strength...............85 or higher
SMR........................................A or B
Accum/Dist rating.....................A, B, or C....exception for brand new issues
Composite rating......................90 or higher
Last quarter EPS.....................40% or higher
Increase curr yr ann EPS est... 30%
Last quarter sales....................25% or higher
Group......................................top 50
Price.......................................$16 or higher
Within.....................................15% of 52 week price high
Average volume........................300,000

You can create this screen and others with the "custom screen wizard" available with a Daily Graphs Online subscription. Running this screen today produced only 58 stocks with most hailing from the oil, energy, steels, ag, commodities groups and sprinkling of tech names.

The market is going to put in a bottom at some point. Watch for a rally attempt that leads to a follow through day and then focus on the top stocks from groups in the top hailing from the top 25.

The next meetup is July 23rd, we look forward to seeing you there. If you have any questions or comments, please send me an email or give me a call!

Good Luck!

Michael Zimmerman
IBD Meetup Host
[address removed]
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