S&P @ 1000, plus Bank of America (BAC) & China Green Agriculture (CGA)

August 3, 2009 by Kenneth Reid

Overnight, financial stocks rallied in Europe, along with commodities. HSBC, Europe’s largest bank, posted a stunning $3.3 billion profit compared with a consensus estimate for a $600 million loss. Our expectation has been that financials will lead this leg of the rally.

Accordingly, we bought Bank of America (BAC) for the TSR Pro model portfolio on 7/29 and now have a 14% gain. We also took some chips off the table in China Green Agriculture (CGA), where we have a quick 50% gain. I plan on buying the dips in CGA, however.

Why? The price and volume action has the profile of a future “10-bagger,” a term coined by legendary investor Peter Lynch. If you have the patience, consider stashing away some shares in your IRA. If I am correct, a $10k investment could grow to $100k in 3-4 years.

By the way, the S&P 500 has printed a pattern called a bearish butterfly or Gartley. Unlike the recent “head & shoulders” top, this is not a pattern you will hear discussed on CNBC, which makes it more likely to play out. The S&P may hit 1000 today, which would be an ideal spot for a corrective phase to begin.