Waiting Game …
Our waiting game continues. Of several
screens I ran today among the high RS stocks, I found only one stock that really
appealed to me.
As I’ve
said before, when the market favors a particular game, such as buying breakouts
from bases, you’ll see that tactic succeed over and over again during a span of
days. When base breakouts are rare, it’s a good warning not bet aggressively on
the isolated case.
Despite the
carnage of the week, investor sentiment has failed to reach extreme fear levels
that typically coincide with a clear-cut market bottom. The CBOE put-call ratio
reached .92 on Wednesday and .97 on Thursday. It’s been higher in this bear
market, notably reaching last October. A classic bottom signal flashed on Oct.
8, 1998. On that day, the Naz plunged 8.1% intraday and the S&P 500 4.9%
before both indexes substantially pared their losses. The put-call ratio shot up
to 1.27.
For your eyeball
training, John Hancock Financial Services
(
JHF |
Quote |
Chart |
News |
PowerRating) is acting well. Note the tightening
price structure, rising relative strength line. You have an intra-base peak at
37 1/2 which could form a resistance level for a trade. However, in this market,
with so few stocks setting up, I’d probably take a pass.
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. For further treatment of these and related topics,
check out the Money
Management area of TradingMarkets’ Stocks Education section.