North of the Blue
...the key to stock analysis 
North of the Blue Executive Newsletter
Issue: # 18 January 12, 2010
Celebrate Ethical Wins ... Celebrate Tradition ... Celebrate Life ...
Use North of the Blue ... the key to stock analysis
Greetings!

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CORRECTION:  In the first paragraph of our January 6 Executive Newsletter I meant to say:  "Adding our Early Sale Rule to our basic rule jumps our earning power to 117.6% with NO increase in risk!  That means you would have gotten $21,760 back for your $10,000 investment."
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NOTES:  This week merits a special second edition of our newsletter.  I made a number of changes and want everyone to look through them to see why.  I also want to give the market a day  or so before I make my Buy Watch suggestions. Expect another email in memo form on Thursday.
-Dick 
 
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Every year we select between a very few stocks that we call our "Gold Star Stocks for the Year".  In 2009 we selected only one stock, ABX, Barrick Gold Corporation.  During last year we earned: 
 
  • 76% using North of the Blue Basic Rule Strategy;
  • 1a) 117.6% using North of the Blue Basic Rule with Early Sell Strategy or
  • 1b) 214.9% using North of the Blue Basic Rule with Early Sell and Early Buy Strategy. 
 
Our earnings, as you see depended on the strategy followed.  Strategy 1 involves very little risk.  Strategy 1a does not increase the risk at all.  Strategy 1b does significantly increase the risk but also significantly increases the profit potential.
 
For more information please read the explanation in the following section. I have repeated this because of our many new members who may not have seen it.
 
To check on our 2010 picks please see the "Gold Star Stocks" section below. 
 
 
Dick Brenneke
January 12, 2010
503-233-9452 or 503-926-7567
Portland, Oregon 97202
 
 Building Block Strategy
... out of this world gains with no added risk to serious risk with serious returns.
January 12, 2010
The Picture of Profit
 
2009 GOLD STAR STOCK SUMMARY
 
STOCK:  ABX
PERIOD:  January through December 2009.
NUMBER OF BUYS AND SELLS:  6
GAINS: 76%, 117,6% and 214.9% depending on which of the following rules is used.
RULES USED:
  1. Rule 1:  North of the Blue Basic Rule: 
    GAIN:  plus 76%.  $10,000 grows to $17,160. 
    RISK is almost zero.
  2. Rule 1a:  North of the Blue Basic Rule with Early Sell: 
    GAIN:  plus 117.6%.  $10,000 grows to $21,760. 
    RISK:  Increase in risk is nearly zero.
  3. Rule 1b:  North of the Blue Basic Rule with Early Buy and Early Sell:
    GAIN:  plus 214.9%.  $10,000 grows to $31,490. 
    RISK:  Increase in RISK:  moderate with the risk declining as the Upward Price and High Price Strength remain close together and reach 90%.
 
No magic, no slight of hand, just a solid stock and easy to understand charts and rules.  A unique approach to making money in the stock market.
This article is a repeat of one I wrote earlier.  I am repeating it because it goes to the very heart of North of the Blue. It demonstrates that North of the Blue does not depend on a single rule but instead builds on a single very simple rule to generate unbelievable profits.  "Unbelievable" that is until you put the money into your bank account.
 
The core rule here is that you have to live with my timing and interpretations.  I'll keep you advised of my progress either in these weekly newsletters or by Twitter.  In depth analysis can be found on our web site.  Click on any underlined words to see the links.
 
In 2009 I selected Barrick Gold Corp (ABX).  ABX not only demonstrated my points easily it also fit into my  view of how the market would act in 2009.  I began my investing in January of 2009 and ended it in December of 2009. 
 
You can follow along by using our program and the Channel Analysis charts.  To begin type "ABX" in the "Symbol" window and then press "Enter" or click on the "Show" button at the top of the screen.  You will see the ABX chart for the last eight months.
 
Since we want to start our analysis with January of 2009 and only eight months are shown on the chart, we need to reset the date to include January 2009.  Enter the date "06/01/2009" in the "End Date" window at the bottom left of the chart screen and then click on the "Show" button.  Now we can see the first few months of 2009 and the last few months of 2008.
 
Here are our basic rules and their results.
 
Rule 1:  North of the Blue Basic Rule (NOTB BASIC RULE) states:  A stock should be bought when its price is increasing up through our Blue Moving Average (NOTB-BMA) and sold when its price is declining through our NOTB-BMA. 
 
By following our NOTB BASIC RULE you or any other investor would have bought and sold ABX six times in the last year.  Your gain for 2009 was 76%.  The risk would be very slight.
 
But using the NOTB BASIC RULE leaves a considerable amount of money on the table.  We do not capture this money because we wait for the sell half of the NOTB BASIC RULE to complete.
 
In order to recoup more of the gain without adding any risk we modify our NOTB BASIC RULE by adding to it our Early Sell Rule.  The Early Sell Rule states that a stock should be sold when its High Price Strength and Upward Price Strength drop below 85%.  We usually incorporate this as an confirming or auxiliary rule.  Here's the complete rule:
 
Rule 1a:  North of the Blue Basic Rule with Early Sell states: A stock should be bought when its price is increasing up through our Blue Moving Average (NOTB-BMA) and sold when its price is declining through our NOTB-BMA OR when its High Price Strength and Upward Price Strength drop below 85% whichever comes first.  
Using this rule the gain for our ABX buys and sells would allow us to pocket 117.6% in 2009.  $10,000 invested now yields $21,760 for the year. Note that we have not increased our risk because we have sold while the stock was still North of our Blue Moving Average.
 
In order to capture price gains before the stock price reaches the North of the Blue Moving Average we introduce a final modification of our NOTB-BASIC RULE.  The rule now provides more accurate (and more risky) early buying as well as early selling.  Here's the complete rule:
 
Rule 1b:  North of the Blue Basic Rule with Early Buy and Early Sell states:   A stock should be bought when its price is increasing up through our Blue Moving Average (NOTB-BMA) OR when its High Price Strength and Upward Price Strength join or nearly join and leave a severely oversold Red Zone, turn sharply up and climb through 50%and sold when its High Price Strength and Upward Price Strength drop below 85%. 
 
Here are the details of the transactions for the year. For an in depth analysis please click here to visit our web site. 
ABX Barrick Gold 2009
North of the Blue Rule
North of the Blue Rule with Early Sell
North of the Blue Rule with Early Buy and Early Sell
Period 1
36.7%
48%
135.2%
Period 2
8.5%
18.5%
25.4%
Period 3
5.3%
5.3%
5.3%
Period 4
6.7%
9.2%
136.3%
Period 5
12.3%
14.2%
18%
Period 6
6.5%
22.4%
35.7%
Total Gain
76%
117.6%
214.9%
North of the Blue's Gold Star Stocks for 2010. 
   ... Buys for 2010
January 12, 2010
 
ETF Accyract at 100%This year our Gold Star Stocks are:
  •  ABX, Barrick Gold Corporation
  • GG, Goldcorp, Inc. New
  • CYD, China Yuchai International Ltd.
 
I may add one more stock.  Here is the objective:  I want to make as much money as possible using a prudent spread of stock sectors while not becoming a "day trader".
 
This answers three questions:
  1. How many stocks should I buy?
  2. How much capital does it take to be a "real" investor?
  3. Can I sell short using North of the Blue?
 
 
So far we are all starting on the same, very level, playing field.  I would not have bought any of these between January 4, the first trading day of 2010 and today. 
 
You are entitled to make your own judgments and to comment on or criticize mine.  I am long past the day trader, make a million in a month philosophies.  Those approaches don't work.  Been there;  done that; got T-Shirt to prove it.  My approach is one taken by a middle age, plus person who does not want to put all of his eggs into one basket.
 
Why did I pick these stocks?  I selected ABX and GG, which are solid gold stocks, because I believe that the dollar will continue to decline in value and smart investors will continue to look for alternative investments.  Realistically, if gold falls through the floor we'll all go back to trading in clam shells.  Does that mean that I'm going to avoid other equities?  Of course not.  Nor am I ready to buy a bar or two of gold and bury it in the back yard.  I'm too interested in determining my own future.
 
Barrick Gold Corporation, ABX, quoting from its prospectus, is engaged in the production and sale of gold and related activities, such as exploration and mine development. Dipping into its prospectus and web site we see that Barrick also produces copper and holds interests in a platinum group metals development project and a nickel development project, both located in Africa, and a platinum group metals project located in Russia. Barrick has four regional business units:  North America, South America, Australia Pacific and Africa.
 
Goldcorp Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and central and South America. It explores primarily for gold, silver, copper, lead, and zinc ores. The company was founded in 1954 and is headquartered in Vancouver, Canada
 
I think that the Chinese market holds significant potential for gain. One of the most fascinating I have seen is CYD, China Yuchai International Limited.  Again, paraphrasing their web site, It owns a controlling interest in Guangxi Yuchai Machinery Company Limited. Through its 76.4% interest in Yuchai, the Company primarily conducts its manufacturing and sale of diesel engines, which are mainly distributed in the People's Republic of China market. CYI also has a 45.4% equity interest in HL Global Enterprises Limited (HLGE). The HLGE group is engaged in hospitality and property development activities conducted mainly in the PRC and Malaysia. CYI is a true emerging multinational with an interest in all of the growth areas of China.
 
And the best part of all of this is:  ABX, GG and CYD are NYSE stocks.  I may buy their stocks, but I am not going to get caught playing on their turf.  While China holds great promise I don't want to find out what their home town rules are the hard way. Gold, as I said, is going to be necessary as and when we recover from our current recession. 
 
Follow our activities on www.twitter.com/northoftheblue.  I'll post any changes as and when they are made.  As I said, I will sometimes sell a stock short. 
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Economic Overview
 
President Obama:  Its the jobs stupid.
A paraphrase of the liberal criticism of President G.H.W. Bush.
 
January 12, 2010 
 The Picture of ProfitOr is it the economy? Maybe the war?  There are so many easy targets out here.  But let's stick to basics.  If I'm not working I'm not buying.  If I'm not buying, the economy falls.Simpletic?  Yes.  True?  Also yes.
 
I am amazed by how many market analysts tell us that "the economy hit bottom [in 2009] and investors began anticipating a recovery."  That sums up so much of what I read.  When pressed for reasons, I don't hear any. Do you?
 
 
 

Changes for Period Ending January 12, 2010

 
VIP 1/5

Moved to Current Portfolio Holdings

CYD 1/5/10 Moved to Current Portfolio Holdings
CISG 1/5/10 Moved to Current Portfolio Holdings.
TLEO 1/5/10 Sold and moved to Cash in the Bank .
ATPG 1/12/10 Sold and moved to Cash in the Bank.
DVN 1/6/10 Sold and moved to Cash in the Bank.
VIP 1/12/10 Sold and moved to Cash in the Bank.
CISG 1/12/10 Sold and moved to Cash in the Bank.
 This includes some changes that may not have been noticed in the last newsletter.

Buy-Watch List January 12, 2010

 
Buy - Watch Stock Date Entered Pull the
Trigger
JCG J Crew Group BW:  1/6/10 $44.46 Watch for stock to cross North of the Blue's Blue Trend Line going up then buy.  A real "maybe" but worth waiting to see the outcome short term.
LL Lumber Liquidators Holdings  BW:  1/6/10 at $26.21. Watch for stock to cross North of the Blue's Blue Trend Line going up then buy. Especially watch strength indicators.
SHY - iSHARES LEHMAN TREASURY BOND FUND 1 - 3 YEARS 10/20/09 Used as an account in which to park funds for maximum security and yield.
TLT - iSHARES LEHMAN TREASURY BOND FUND 20+ YEARS 10/20/09 Used as an account in which to park funds for maximum security and yield.
 
Also check "DickPicks" in your "DicksPicks"List in our program.
 
 
 
Current Portfolio Holdings
January 12, 2010
Stock Dates Bought/Sold Reason(s) for Action Taken
IYT - iShares Dow Jones Transportation Buy Watch: 11/3/09;
Buy 11/5/09 at $52.21.  Current $75.49.  Up 44.59%.		 11/17/09 hold with caution.
 
 
Gains & Losses:  Current Cash in the Bank Portfolio
... Where the real profit is

Cash in the Bank "Portfolio"
January 6, 2010
VIP  Open JT Stock Company Vimpel Commun Buy:  1/12/10 sold at $21.00. Gain plus 10.99%  1 week Crossed North of the Blue's Blue Trend Line going up then buy. Still a good buy.
CISG Cininsure Ads Buy:  1/6/10 at $21.40. Sell 1/12/10 at $21.20. NO GAIN FLAT 1 week Power and price both fell. Move to Cash in the Bank.
ATPG - ATP Oil and Gas CP BW:  12/17/09
Buy 12/17/09 at $17.64.  Sell 1/12/10 at $18.98. Plus 7.06% in 3 weeks. 
Moved to Portfolio Holdings.  Should have been bought December 17. Actually bought late on xxx
HAL Halliburton BW:  12/17/09
 
Buy: 12/31/09 at $29.99. Sell 1/12/10 at 34.87. Plus 13.99% in 2 weeks.		 Price and power both fell. Time to sell.
OXY Occidental Petroleum BW:  12/17/09
Buy: 12/22/09 at  80.37.  Sell 1/12/10 at $82.17; plus 5.97% in 3 weeks.
 Price and power both rolled over.
APA - Apache BW:  12/17/09
Buy: 12/17/09 at 99.59. 
Sell 1/12/10 at $106.42.  gain:  6.86% in 3 weeks.
 Price and power fell.
BRY - Berry Petroleum Buy 12/18/09 at $27.89
Sell 1/12/10 at $28.97 Up 3.87% 
 Price and power fell.
DVN - Devon Energy Corp Buy 12/18/09 at $69.26 
Sell 1/6/10 at 76.42 gain 10.34%
 Price and power fell off.
EEE - Evergreen Energy Buy 12/18/09 at $0.31 
Sell 1/.12/10 at 27 cents. Gain 87.09%
 12/18/09 coming up on Blue. Everyone needs a laugh now and then. I'm still laughing.  Patience is paying off.Enough with the patience. Let's get serious.
KWK - Quicksilver Resources Buy 12/17/09 at $14.55. 
Sell 1/12/10 at $15.53. Gain 6.73%
 1/12/10 Everything went south.
OIS - Oil STS International Buy 12/18/09 at $37.92 
Sell 1/12/10 at $41.84; gain 10.34% in 3 weeks
 All went south
TLEO - Taleo Corp CL A BW: 12/07/09
Buy:  12/22/09 at $22.20.
Sell: 1/5/10 at $24.34. Gain 9.63% in two weeks (annualized 346%)
 Watch for stocks to leave Red Zone in top panel and for stochastic strength measures to climb past 50%.  Moved to Portfolio Holdings.  Should have been bought on December 22.
DVN - Devon Energy Corp Buy 12/18/09 at $69.26
Sell 1/6/10 at $76.42.  Up 10.34%.
 12/18/09 went North of the Blue.
PQ - Petroquest Energy Buy 12/18/09 at $6.04 
Sell:  12/28/09 at $6.83. Up 13.08%
 12/18/09 went North of the Blue. Sold when fell below 85%
PTEN - Patterson Utilities Energy Buy 12/18/09 at $15.48
Sell:  12/28/09 at $16.22.  Up 4.78%.
 12/18/09 went North of the Blue.
UPL - Ultra Petroleum Buy 12/17/09 at $49.65.
Sell: 12/238/09 at $53.49. Up 7.73%
 12/17/09 went North of the Blue.
NEU - NewMarket Corp

Buy Watch: 10/27/09
Buy: 11/2/09 at $91.10
Sell: 12/29/09 $118.38. Up 29.68%

12/17/09 hold.  Sell because stochastics fell below 85%
SWN Southwestern Energy BW:  12/17/09
Buy: $12.17 at $44.30
Sell:  12/29/09 at $50.74 GAIN 14.54%
 Watch for stock to cross North of the Blue's Blue Trend Line going up.  Stock rolled over and fell to 85%.
DUK - Duke Energy Buy 11/20/09 at $16.05. 
 
Sell 12/1/17 $17.52 up 9.15%		 Sell 12/17/09 stochstics fell below 85%
UNP - Union Pacific Corp Buy Watch: 11/3/09;
Buy 11/9/09 at $61.04.
 
Sell:  12/14/09 Up 65.40 up 7.14%.
 Sell 12/14/09 stochastics fell below 85%.
FDX - Federal Express Buy Watch: 11/3/09;
Buy 11/9/09 at 77.02; Sell 12/17/09 $87.10.  Up 13.08%. 		Sell 12/17 stochastics fell below 85%
JNJ - Johnson & Jonhson  11/12/09
Bought 11/12/09 at $60.14.
 
Sell:  64.78.  Up 7.71%
 Sell 12/17 stochastics fell below 85%
CSX - CSX Corp

Buy Watch: 11/3/09
B: 11/3/09 at 45.10

 Sell: 12/17/09 49.35 up 9.42%
 Sell 12/17/09 stochastics below 85%
MED - Medifast, Inc. Buy Watch: 10/28/09
Buy 10/29/09 at 20.26
 
Sell: 12/17/09 33.05 up 63.12%.
Sell 12/17/09 stochastics trending downward.  I have made enough so don't get greedy.
CAT - Caterpillar, Inc. Buy Watch: 10/20/2009
Buy 11/04/09 at $56.10
Sell 11/16/09 at $60.90.  Up 8.55% in 12 days.
 Strength lines seperated and fell below our 85% stochastic line AND price line is descending towards our Blue Moving Average.
EMS - Emergency Medical Services Corp Buy Watch: 10/20/09
Buy 11/5/09 $49.39.
Sell 11/17/09 at $52.06.  Up 5.40% in 2 days.		 Price line fell and both of our stochstic Strength lines fell below 85%.
GMCR - Green Mountain Coffee Roasters

Buy Watch: 10/27/09
Buy: 11/10/09 at $70.68. Sold 11/12/09 at $70.71.  Up 30 cents in two days. Out the cost of brokerage fees.

 
 

 

 Stock price fell below our Blue Moving Average and both strength stochastics fell way below 85%.
MED - Medifast, Inc. Buy Watch: 10/28/09
Buy 10/29/09 at $20.26. Sell
11/10/09 26.93 up 32.92% in two weeks. 		Sound fundamentals; good earnings; Channel turning up; buy at the Rebound Rule Buy Point. 11/3/09 buy rule satisfied.
PCLN- PriceLine.com Buy Watch: 10/27/09
Buy 11/2/09 at $157.29
Sell 12/07/09 at $221.99.  Up 41.13% in three plus weeks.		 Stochastics are beginning to lose their strength.  Put the profit in the bank.
ABX - Barrick Gold Corp Buy Watch: 10/20/09
Buy 10/29/09 at $35.32.  Sell 12/03/09 at $47.95. Up 35.76% in 5 weeks.
 Price began to fall and stochastics showed no power as they sank rapidly below 85%. In addition dollar was rebounding.
GG - Goldcorp

Buy Watch: 10/20/09
Buy 10/30/09 at $35.47. Sell 12/03/09 at $45.88 Up 29.35% in 5 weeks.

 Price began to fall and stochastics showed no power as they sank rapidly below 85%. In addition dollar was rebounding.
GLD - SPDR Gold Trust

Buy Watch: 10/20/09
Buy 10/29/09 $101.48. Sell 12/2/09 at $119.27. Up 17.53% in 5 weeks.

 Price began to fall and stochastics showed no power as they sank rapidly below 85%. In addition dollar was rebounding.

GOLD - Rangold Resources Ltd WS Buy Watch: 10/20/09
Buy 11/2/09 at $66.50. Sell 12/03/09 at $88.63.  Up 33.28% in 5 weeks. 		 Buy when price at the Rebound Rule Buy Point or North of the Blue Buy Point or the Support Level Rebound Point. 11/2/09 Rebound Rule satisfied and Upward Price and High Price Strength are at 85%
AAUKY Anglo American PLC Ads Buy 10/20/09 at $18.40
Sell 10/23/09 at $19.84 up 7.82%		 Sell when the Upward Price and High Price Strength fall below 85%. 10/23/09 sell rule satisfied.
ABX - Barrick Gold Corp Buy 10/5/09 at $35.98
Sell 10/14/09 at $40.51 up 12.6% 		Stochastics fell below 85% and price dropped. 
GOLD - Rangold Resources Ltd WS Buy 10/5/09 at $65.76
Sell 10/16/09 at $76.20 up 15.87% 		at the Rebound Rule Buy Point; sell when the High Price and and Upward Price Strength fall below 85%.
CAT - Caterpillar, Inc. Buy 10/5/09 at $48.70
Sell 10/10/09 at $57.78 up 18.6% 		at the Rebound Rule Buy Point
EMS - Emergency Medical Services Corp Buy 10/5/09 at $46.04
Sell 10/16/09 at $49.69 up 7.9% 		at the Rebound Rule Buy Point
Alcoa (AA) Buy 10/5/09 at $12.85
Sell 10/16/09 at $14.28 up 11.1% 		at the Rebound Rule Buy Point
AAUKY Anglo American PLC Ads Buy Watch 10/2/09
Buy 10/20/09 at $18.40
Sell 10/23/09 at $19.84 up 7.82%		 Sell when the Upward Price and High Price Strength fall below 85%. 10/23/09 sell rule satisfied.
GG - Goldcorp Buy 10/2/09 at $37.72
Sell 10/16/09 at $42.74 up 13.3% 		at the Rebound Rule Buy Point; or at the Move out of Red Jail Bars; or at the Support Level Rebound Point;sell when the High Price and and Upward Price Strength fall below 85%.
AAUKY Anglo American PLC Ads Buy 10/2/09 at $14.80
Sell 10/23/09 at 19.84 up 34.1% 		at the Support Level Rebound if it occurs
GOLD - Rangold Resources Ltd WS Buy 9/2/09 at $57.25
Sell 9/16/09 at $75.85 up 32.48% 		Buy as stock price goes North of the Blue; sell when the High Price and and Upward Price Strength fall below 85%.
GLD - SPDR Gold Trust Buy 8/27/09 at $92.38
Sell 10/15/09 at $103.95 up 12.52% 		the Rebound Rule Buy Point; sell when the High Price and and Upward Price Strength fall below 85%.
Insider Information
For North of the Blue Users
Insiders' tips:
 
Our Executive Newsletter is published mid week every week.  We write the news on Tuesday and try to do a final review on Wednesday just before it goes into the email. Often market factors cause us to wait until Thursday before we publish. 
 
Check our web site for more information on Channel Trading for those of you doing your own analysis. Mastering this analysis tool, which is unique to North of the Blue, is well worth the effort.
 
Tweet!  Yes, we are now on Twitter.  See us at twitter/northoftheblue.
 
If you are not a subscriber, now is the time.  Convert your trial subscription and save $25 on the Activation Fee.  A great deal that won't last long.  Click here to see why you need to subscribe.
 
Sincerely,
 

Richard Brenneke
North of the Blue Stock Analysis System
In This Issue
Building Blocks
Gold Star Stocks 2010
Jobs!
Changes This Period
Buy-Watch List
Current Portfolio Holdings
Cash in the Bank
Insider Information: Using NOTB
Quick Links
 
 
The Picture of Profit
Read why then use your North of the Blue tools to check out our Buy-Watch list.
 
R. J. Brenneke photo
Featured Articles
Look at our Buy-Watch selections then follow them into our Current Portflio and our Cash in the Bank "Portfolio". The thinking behind our selections is in our Education section at our web site.