Go With The Flow
BEI Technologies
(
BEIQ |
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hand, Elan PLC
(
ELN |
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this later! Meanwhile, the S&P 500 has managed five days of distribution in
a three-week period: 6/12, 6/11, 5/30, 5/29 and 5/22. On top of that, we have
also managed to convincingly break below the 50-day moving average with yet
another distribution day.
It looks as though the rally beginning
in April is either ending or getting much more difficult to play in regards to
the risk:reward factor. Now that institutional selling has been evidenced, it is
a good idea for us to become “defensive investors.” Rather than
looking for stocks to go out and buy, evaluate how stocks in your portfolio are
acting. Are they declining on heavier volume? Are they rallying on light trade?
How have the other stocks in the same group been acting?
Now back to the beginning, BEI
Technologies is experiencing solid selling for the second day in a row. One day
of heavy-volume selling is not reason to abandon ship (6/13), but when the stock
was unable to fill its opening gap and volume was huge, that was a clear-cut
sign to sell. This is what I mean in looking for signs of trouble and being
defensive.
On the other hand, Elan PLC has broken
out and is up 1%! Yet I do not see myself buying this stock for one reason: I
would be going against the tide. There are a lack of setup, breakouts have
been failing all over the place and the market is experiencing selling by
investors who may not stop selling anytime soon. Fundamentally speaking, the
stock is lacking a bit in the ROE department and the Medical-Ethical Drug group
has slipped 40 spots over the past week. Technically speaking, the stock has
formed a nice, 18-week base with a high handle.
Krispy Kreme is one that falls in
between the two previously mentioned stocks. It has broken out and held well
above its pivot price. I am continuously looking at this stock from a technical
perspective and defensive in nature. Yet, it has not given a clear reason to
sell if you are long and is definitely not at a point to buy. It has posted
occasional days of distribution, such as 5/30, 6/4 and 6/11, but it has been
quick to recover on heavier trade or consolidate on lighter trade. Nonetheless,
if you are still in this, know the exact exit price if things turn ugly.
Several of the other successful
breakouts have begun to show signs of trouble and warrant further observation.
Columbia Sportswear
(
COLM |
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Atlantic Coast Air
(
ACAI |
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(
ACF |
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sold off on Tuesday in heavier trade. Express Scripts
(
ESRX |
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higher with market forces pushing against it.
It is definitely a time to be careful,
and unfortunately, move back into a stance similar to that of the past year.
Usually following solid distribution days as we have been seeing, there is some
kind of rally. If that occurs again, it will be important to see how leading
stocks and recent breakouts act.
Have a great weekend!
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