Watch These 2 Stocks When The Selling Is Over

It
is never an encouraging sign to see the market post several blatant
distribution days and then show an inability to rally.  2005 seems
to be off to a rocky start for the market, BUT there still may be hope.

 

 

 

We all know that the market
has already wiped out December’s low-volume gains and is now starting on
November’s gains.  The selling we have seen over the past few days could
amount to further intermediate-term declines if it continues.  One thing worth
keeping a close eye on is whether or not the market can find strength and
rally to recovery on heavy volume towards the latter part of this month.  If
this occurs, the uptrend will obviously still be in place. 

 

Some of the leading stocks I
have spoken about recently have started succumbing to this pressure.  Ebay
was today’s example as it found itself trading below the 50-day moving average
on heavy volume. 

 

 

Other strong names seem to be
hanging in there for now.  Apple (AAPL) is an example as the stock is
consolidating gains and absorbing this broad sell-off brilliantly.

 

 

Just as with the overall
market, it will be important to watch how these stocks act following the
selling.  Do they fail to recover their 50-day moving averages in a few days’
time?  Do rallies occur on light volume?  These two examples would be a reason
to unload positions.

 

If this decline caught you by
surprise, then you may wish to unload some shares into a rally.  If the rally
comes on heavy volume, it may be a good idea to see how the market acts
afterwards.  We will keep an eye on the action as this month unfolds.  There
are two sides to every story, and at this point we have only seen one: the
selling.  Over the next week or two, I imagine we will see the buying.  That
is the second side of the story that will need to be considered before writing
off the uptrend that has been in place since early-September and can be seen
through a monthly chart of the NASDAQ.

 

 

Enjoy your weekend!

Tim Truebenbach