Exceptional Strenght in a weak market!

CSTR hit a new 52 week high on Friday 30th of April, 2010 while the market experienced a distribution day. Its price increase by over 16% with volume on the day swelling by more than 10X the average volume of the past 50 days.

The reason for this exceptional strenght was a big earnings surprise. Instead of the $0.14 per share for Q1 that analysts were expecting, CSTR announced $0.21 for a EPS increase of 200% on revenue growth of 47% for Q1 2010 over 2009.

Since then CSTR has continued to advance to new highs despite the severe weakness in the overall markets and has hit a new high today on more than 4X average daily volume. Initially I was reluctant to add CSTR to my watchlist because of how extended it was. However, its persistent strenght in the weak market prompted me to investigate it. I discovered that it satisfies most of my fundamental crieterion and so I have added it to my watchlist.

Coincidentally, part of CSTR's business, DVD rentals, overlaps with NFLX another powerful stock already on my watchlist. The strenght in both of these stocks further underscores that the DVD rentals is currently a powerful catalyst behind these two stocks forcing continued up ward revision in the valuation of these two companies. In addition, CSTR recently announced plans to open some 100 DVD rental kiosks by the end of June. So this will have a further impact on its bottom line.

So like NFLX, I am waiting for weakness in the overall markets to get long of CSTR and NFLX. However, my favorite stock is still APKT as it comes the closest to satisfying all my criterion and leads me to the conclusion that this one will perform best of all the stocks on my watchlist in a new uptrend.