High RS Pull Back
High relative strength stocks pulled
back Wednesday, buffeted by the political uncertainty in Washington, and coinciding
with overbought levels in Nasdaq stocks.Â
The rally that began in April still
feels strong, but in the near term, I’m finding few entries. Some favorites,
such as Charlotte Russe
(
CHIC |
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PowerRating), have broken down, but the overall
leadership remains intact, though a tad extended.
Hot Topic
(
HOTT |
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PowerRating) pulled back 8.1%
but remained well above its old base. Â
Skechers
(
SKX |
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PowerRating) and Metro One
Telecommunications
(
MTON |
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PowerRating) recovered from intraday red ink. International
Game Technology
(
IGT |
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Chart |
News |
PowerRating) is holding up.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business.