Do You See What I See?
I think it was the great
Jesse Livermore that once said that the second most important conclusion about
investing is when to be out of the market. Certainly, up until April 11, it was definitely
the case. As of right now, it continues to
feel that while support is still strong, the upside remains
very limited. The
market is just stumbling and bumbling right now. Not a bad time for
a vacation. It
is also not exciting me that more and more stocks are breaking down. Stay nimble!
That doesn’t mean I will not keep searching for both buys and sells. Today, I give you a little
of both.
(
LNCR |
Quote |
Chart |
News |
PowerRating) — So
far, the
action looks fine. Notice
how it pulled back on light volume back to support. This is what I like
to see.
P.S. At
the time of my writing, the
stock was hanging in there nicely. But like most breakouts
lately, the
finish below its
pivot point today worries me.
BE CAREFUL.
(
WMI |
Quote |
Chart |
News |
PowerRating)
— The Pollution
Control group continues to act well. The biggest of big caps breaks out with
expanded volume. Fundamentals
are suspect and it is a slow mover.
I received an email
asking about
(
CHS |
Quote |
Chart |
News |
PowerRating).
This is a pretty good-looking
stock in a nice quiet consolidation. If not owned, you may want to
have it on a watch list. Except for one thing…and one of the most important
lessons I have learned in the markets. It is that at least 75% of picking a
stock is picking a sector that has a lot of stocks
acting well or in an uptrend. Most investors will
look at CHS and feel there were no problems.
Well, take a look
at the next few charts.
Do you see
anything that I am seeing? There
are more than just these four stocks that are now acting poorly in the group.
So, my next question is: "What
usually happens when most of a group breaks down and one or two names hold
up?" First off, it
helps me isolate leadership in a particular group. This is a great
exercise for any investor. Secondly, I go back to history. It is my contention, based on years of
studying stocks and sectors, that odds favor the
last ones standing finally cave under the group pressure. I would be watching
CHS for any peculiar activity because most of the group has now topped out.
Remember, no investing discipline is infallible. I am just a big believer in
sector analysis. I always look at what the rest of the group is doing before
entering a position into a particular stock. I believe you
should too.
Note: I needed to add the P.S. to LNCR after
looking at the close on
Wednesday. I am now even
more worried
about Technology stocks, specifically the high
flyers of 1999/early 2000. I have mentioned some of
them as shorts in some past reports. To be blunt, the
technical condition has deteriorated and many are on the bubble of breaking
down. Stay
on your guard. It
may start getting bumpy again.