Why You Should Give Your Selling Rules Some Leeway Now
Thank goodness the market and leading stocks are rising,
because with the US Open rain delays, there wouldn’t be much else to do!
The major averages have enjoyed flawless action over the
past couple of days. We are seeing solid rallies on heavier volume and
consolidations on lighter trade. Overbought conditions are turning more
overbought as is the case with Bull Markets.
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In the beginning stages of Bull Markets, stocks are just
beginning their runs. Some of these stocks may go on to massive 1,000%+ runs
like big names like Cisco Systems
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PowerRating) did in the 90’s. Other names may
have good intermediate-term runs and then run into difficult when the market
corrections hit, (defined by a pullback in a major average of 10% or less.)
The trick right now is to identify what works best for
you and your style. If it is trading, then learn how to identify strongly
trending stocks with risk-adverse entry points. If you prefer holding stocks,
than select a strategy and money management plan that has you identifying
strong companies with appropriate stop levels.
Whether you trade, invest or meet somewhere in the
middle, there are opportunities appearing right now.Â
Safenet
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PowerRating) has bee
mentioned before in this column and has moved through resistance at 36.82 and
gained almost 10% in a few days.
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United Online
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PowerRating) has been making a nice move to new
52-week highs. Unfortunately, volume has not been very heavy as the stock
breaks through key resistance levels. That is not to say it won’t move
higher, but it is saying that any sellers that pop out of the woodwork will
have their way much more easily.
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During some downtime this morning, I flipped through some
charts I have been meaning to look at and I was very excited at what I saw.Â
Internets (HHH) have been leading the market since March, and they aren’t
going away anytime soon. This is fantastic for this rally! Throughout the
past few years of Bear Market, we have seen a group take the leadership reigns
for a short time and then see money leave. This is the longest I have seen a
group hold steady for.
I am also extremely impressed at the amount of names
setting up in the group. Although the growth rates are a little lighter than
I would normally like to see, Findwhat.com
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PowerRating) is pushing towards a nice
level at 25.49.
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It is important to watch names closely and this goes back
to what I mentioned above about identifying your trading style. It is very
important to realize that we are probably in the midst of a Bull Run right now
and to give selling rules ample leeway. I’m not saying to ignore them, but I
have already seen a couple examples of climax top criteria where the stock has
hit highs, fallen, and recently came roaring back. Erring towards being long
has not punished a portfolio.
Usana Health
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PowerRating) is a recent example. The stock
outperformed most names since March and peaked with a massive move on 6/11 to
6/17. Since then, the stock has set up a double-bottom base despite the claim
that stocks do not usually recover from these climax runs.Â
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Keep an eye out for other names such as the Chinese
portal stocks like CHINA and SOHU. They may not do anything but crumble, or
they may resume the strong leadership roles they held all spring.
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Have a great weekend,