Friday confirmed that the recent topping action in individual stocks is signaling for a move down; the SP600 with its 3.8% move lower leads the list. There was negative breadth, all around, and well over 90% of the Industry groups I track were down for the day. That is a poor number.
This could provide a reason for a short-term bounce in the next couple of days. But with all short-term trends being down after such a big run-up from April, more downside action would be welcomed to shake out the new, late longs and create new bases for stocks to breakout of. Another sign of more downside is all the poor looking charts the recent great stocks have turned into. With that too, I am getting a lot more shorts coming up with better risk/reward potential than I have with my longs.
A positive sign that the downtrend might be contained would come in the form of lower volume on the way down. So far, so good, as volume did come in lighter yesterday, for the Nasdaq and NYSE. It seemed as if funds did not dump en mass, and instead focused their selling on the hottest of hot sectors: Homebuilders, Retail, and REITs. The good news is fresh breakouts from first stage bases work well, while breakouts from eratic, sloppy, and late stage chart patterns continue to disappoint after this big run-up from April.
Also one other point: BIDU!!! what is this? 1999-2000. I need more facts before I declare this to be in the bubble category. But it sure does look speculative. YIKES! Stay away, for now, unless you have "inside" information. Which I doubt most of you have.
New Swing Longs: LTON PTG OLGR GBND REDF VSAT TMNG VSAT ASGN DVD. Most of these are very speculative. So keep a good eye on them. Why? Read below.
Longs Outperforming Market (up 5% or more): BCON!!! NRPH CPTV
New Swing Shorts: GKIS TSM GFIG CRYP INPC QSFT ZGEN FHR PSA JOE MAA CQB RWT WPO. Most of the stocks mentioned are REITS. I will not short these boring stocks, but if you do short them it should provide some short term gains.
Disaster Du Joirs of the Week: SCVL PWEI. This is why you watch stocks closely. Even though both BLEW UP, I only got hit with a 4% and a 15% loss respectively. Both dropped over 25% from their highs, but by buying right I ended up with some small bruises and nothing more. They were nice when purchased, now they are trash being taken out. Another great example of why you should never load the boat with smaller less attractive fundamental issues. Cheap stocks always stink, unless they are going up. Cheap stocks are cheap for a reason; they cost what they are worth.
ALOHA and have a great weekend!
4 comments:
Take a peek at CAFE, Joshua. To be delisted on Monday.
Cheers
CAFE was a big joke. Any momentum players that got caught in that one deserve what they get. CAFE is a pure gamble. Only greedy people will try to take a highflyer after it goes too far too fast.
I never wish anyone harm. But I have been listening to some people who bought CAFE and are still holding it and they dont sound too happy.
If you go long a stock after it has made a 100%-300% move in a week, you are obviously not disciplined and do not have a system. Only time will fix that.
Bottom line is: When you dont do your own work and buy what other people pump after they are in it, you are going to get a financial spanking.
Also if you bought CAFE after the first big up day and did not take profits on a 100% move two days later you are greedy. Always take some money off the table after a 100% gain.
Tough words and tough love. It is the only way I know how to keep people from playing these.
But as Jesse Livermore reminded us back in the 1920s, a sucker is lured into the stock market looking for great riches everyday. Sadly, they will only learn their lessons after they have lost their stake in sucker plays. Even then, some people never learn.
Aloha
I have a question about double bottom pivot points:
“If a double bottom has a handle, then the peak price of the handle is the pivot buy point” - How do you know if there is going to be a handle or not? (You can only see that there will be a handle if you look in hindsight) but otherwise when looking at current data you seem to have two options:
a) To wait for a handle to form/hope for one to form then set the pivot point
b) To buy when the price reaches the 'middle point' of the double bottom/
Correct Liraz.
You do not know until hindsight.
If the double bottom breakout you buy is purchased at the proper pivot point, the handle that might form afterwards should not shake you out. If it does, it does. No use crying over spilled milk. If however after you cut your loss, it then forms a handle after its double bottom, and you still like the company buy it.
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