Follow Your Rules
The market is
a crazy, baffling place to try and figure things out right now. As I
try to form my opinions about the stock market and speak with people, it seems
as though the conversation gets wrapped up into trying to understand all of the
recent events, not just the market. Times like this are where rules are key.
They will bring us back to the basics.
Follow the indices as usual. Keep an
eye out for recent stocks showing leadership traits. Be careful not to get
caught up in all of the hype surrounding the stock market as it trades after
being closed for the past four days. Rather than trying to think out what is
going on with the stock market, the economy and America,
use the price-and-volume action of the market to tell you what is going on.
Yesterday I was speaking with a client
and friend about the current situation and how it compares with other bad
markets that I have been around for, and how everything pulled out of it. There
have been times where I believed things were really bad and I was forced to
watched a market confirmation (even though I didn’t believe it)
and my
rules forced me into a stock (even though I didn’t believe I should be
buying it.) This specific example refers to October of 1998 and the stock
was America Online
(
AOL |
Quote |
Chart |
News |
PowerRating). Obviously the rest was history, and thank goodness
I was following strict rules that alleviated my personal opinions!
Obviously the indices don’t look so
healthy. It doesn’t matter. In as little as four short days things could be
right back on track and buying opportunities could present themselves.
Leadership in this market? How could
that possible be? When the entire market is down it is very easy to spot stocks
that are green on the day. It doesn’t mean these are all ones to go after when
the market changes direction, but it is a place to start. CACI International
(
CACI |
Quote |
Chart |
News |
PowerRating),
Flir Systems
(
FLIR |
Quote |
Chart |
News |
PowerRating), Magal Security
(
MAGS |
Quote |
Chart |
News |
PowerRating) and Engineered Support
(
EASI |
Quote |
Chart |
News |
PowerRating)
are a few such stocks.
If you do decide to buy anything that
looks good now, be very, very careful. The market’s downdraft is very powerful
and will most likely pull most stocks down with it. This is where stop-losses of
7%-8% may not be enough to save investors as they offer small comfort against a
market or stock gapping down.
Please feel free to email me with
thoughts and comments surrounding the current environment. I tend to relay a
conservative approach, and if this can be helpful, please do not hesitate to
bounce things off me.
Good luck during these unprecedented
times,