There was some real fear out there today, as stocks fell across the board. The situation in Iran and rising oil prices were the culprit for today's losses. Unlike most other days, the talking heads got it right today. The negative action was in fact caused by the geopolitical situation in Iran. Can you blame traders for selling?
The SP 600 fell 1.3%, the Nasdaq fell 1%, and the SP 500 fell .8%. The selloff today did come on higher volume. With this distribution day, the Nasdaq now has four distribution days in four weeks and the SP 500 has three distribution days during the past four weeks. Breadth was horrible on both exchanges, with 3 stocks declining to every one rising on the NYSE and Nasdaq. Not a good day at all.
Today's action was pretty bad. The past two days many stocks that I own have flashed climax tops, extended runs, exhaustion gaps, heavy volume selloffs, and 50 dma breaks. That has caused me to start raising some cash by taking profits in big winners and speculative stocks starting to show some weakness. I have also been cutting losses on speculative and cheap stocks that have gone basically no where for me the past couple of months. This does not mean that I am selling everything; it just means that I am selling down some positions. There are still a fair amount of stocks that are showing no damage at all. However, the past three trading days have caused some stocks to throw up big red flags for possible further deterioration.
Now, I don't know what is going to happen next. We may rally some more or we may need to selloff some more to get the fear back in the market that we lost last week (AAII survey). We can game some insight by looking at the put/call ratio. That ratio climbed above 1.0 intraday before closing around .95. Spikes above 1.0 show that traders have a high level of fear out there as they buy as many puts as calls. However, recently, it has taken a multiple number of days where the index closes over 1.0 to give a strong signal that the selling is over. So we are probably in no mans land here.
Since I am not sure what the market wants to do, I advise traders to stay defensive. Keep new buys small if you buy anything, look for climax/sell signals on your long term winners, and get rid of your laggards to raise some cash for the next up move.
Raising that cash will get you ready for the next round of leaders. And there seems to be a fair amount of stocks that have pulled back on low volume and if the market gets back into the swing of things could be ready to attack their old highs. These charts are still very pretty, even after this nasty pullback today.
To reiterate: Take some profits if you have not already in your winners. This reversal had the feel of something more to come; but it might have also been a final washout. It is hard to tell here. So caution is recommended.
If you read yesterday's post you will see that the action in individual charts warned us of today's move. You gotta love charts!
Great luck. See you tomorrow!
New Swing Longs: NONE
New Swing Shorts: NONE
Longs Outperforming Market: ERS-294 CBG-118 TGC-112 NXG-96 AKAM-95 FFIV SNDK FTK PNRG-62 CIB-39 QCC KNXA-60 HOM-34 OMNI-41 SVNT SWIR VCP FMTI TGB-85 EVST-56 RNWK TRT
Shorts Outperforming Market: NONE
Stocks On Radar Screen: ARD TESOF
Take Profits, Cut Losses: ESLR FC OPLK AP CVN ANO
Blowups: PEC -- Leaving with a 4% loss.
6 comments:
Hey, Josh, is AAPL a lower risk buy here with its pullback on very low volume compared to its rise above the 50?
Also thoughts on CTLM?
I got LNUX in 4.20 area, but can't watch the stock all day. Where would you set a stop loss at? Is 4.15 area too close? Thanks for all your help?
Josh, I re-read Monday's post looking for what was said about the individual charts indicating Tuesday's distribution. Can you elaborate? Was it that there were 6 stocks that gave you signals to get out?
Thanks.
SID and ROLL look like stocks to watch after todays moves
AAPL would make a good swing here if you have a cut loss at the moving average.
CTLM is nice. It is almost ready to b/o, from what I can see.
LNUX answered in previous date.
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I have taken some profits, cut some losses, locked in some gains, and have kept new buys very small the past two days. I don't think this is a sign of an impending pullback it is just a sign that the markets are going through a pullback and some old leaders are making a rotation into some possible new advancers.
It was right there in Monday's post.
It was also all the profit taking I mentioned on stocks.
Now I might be wrong how long the pullback will last but I still warned investors by taking the appropriate action.
If you read my blog and look at all the list of stocks the past five days you will see I was cutting some big winners, telling you where to take profits, etc...
I would have elaborated more in my blog post but I was and still am going through one of the WORST things to ever happen to me in my life. And I have gone through two near-death experiences where I flat lined both times.
I was handed a nasty surprise and I am just now starting to settle down into my routine again.
Someone's heart is a nasty thing to play with my friends. What happened to me three weeks ago I would NEVER do to another person.
So if I didn't make it clear that I was positioning for a bit of a weak market please forgive me.
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I apologize that I don't list all my sells but I don't get paid to do that. Later on I will have a very nice setup. But for now my free advise can only cover so much.
Selling is one of the hardest things to teach new traders. And doing it for free, in the words of Austin Powers, "isn't my bag baby."
Great luck out there!
Joshua you should never have to apologize. What you do is awesome! Letting people follow your picks and educating them on when to sell. More importantly you dont have a hidden agenda, only to make money. thanks
Thank you for taking the time to elaborate. I'm sorry to hear you've been having hard times and appreciate that you have continued to post and the effort it must take to keep this site updated.
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