For The Reversal Day Crowd
For the reversal day crowd that
is hollering over Friday’s action, I have one thing
to say. “I know reversal days, reversal days are a good friend of
mine…that was no important reversal
day.” Maybe in price, but not in volume
and not in sentiment. I consider what happened on Friday was one thing
and one thing only…selling exhausted itself near-term. That’s it. You may want
to check out Sept. 21’s action. That was a reversal day.
On Friday, there was no panic selling. There was panic
selling on Sept. 21. Anyone and everyone were selling at any price.
Put/calls spiked above 1 on Sept.21. Nothing doing on
Friday.
The VIX spiked to 57.31 on Sept. 21. Not even close on
Friday. The VIX has been moving up…but nothing that excites me or should
excite you.
Lastly, there should be a massive wave of buying on a real
reversal day. If that was massive buying on Friday, then the market is in even
more trouble than I thought.
Enough of that. Now let’s talk about one of the most
important technical lessons I
have learned. It goes like this:
“It is easiest to isolate
weakness when the market is strong. Conversely, and
very appropriate right now…it is easiest to
isolate strength when the market
is weakest.”
Think about it. If everything is going down…but a
handful of names are holding up
and even breaking out…you need to know about them. Why? It’s simple.
If they can’t go down in the worst of markets, odds favor that they
have a chance to lead when the market rallies.
This in itself does not mean that
they will, but I want those names on my watchlist. Understand that in
bear markets, they usually get to
everything…but until they do, I keep watching.
Here are some of those names. Treat them with care, as the
market is not paying up for much right now. We do need to look at the chart of
the S&P 500 first to compare
them to. Notice the distinct outperformance by these stocks.
Electronic Arts
(
ERTS |
Quote |
Chart |
News |
PowerRating) on a high volume move through $65.
27-week cup and handle in Autozone
(
AZO |
Quote |
Chart |
News |
PowerRating).
Great chart on UPS
(
UPS |
Quote |
Chart |
News |
PowerRating)…so far. Just about breaking
out.
Doral Financial
(
DORL |
Quote |
Chart |
News |
PowerRating) looks OK breaking through $40.
(
ACS |
Quote |
Chart |
News |
PowerRating) breaking through $56.65.
All of these stocks or none of these stocks may work in
this very tough environment. But
we don’t care. If these stocks don’t break out…we ignore. If
they break out and fail, we put in stops. We will revisit them in the following
weeks to see what happens.