Looking For Leaders
There’s always
one way to eliminate the frustration and uncertainty surrounding
the stock market: Let a solid set of rules be your
guide. Breakouts have been failing and the market has been acting
suspect. We’ve seen three days of institutional selling out of the past 12
trading days and today may be number 4. By using strong rules to analyze this,
we are simply watching the daily action and letting the market tell us what to
do.
Right now, if I see two more distribution days appear, I am not going to seek
out new purchases, no matter how solid the candidate. I will also cut back on
any current holdings. For now, it is important to follow what the overall market
has already shown us and that is a confirmed rally from several weeks ago.
The next step takes us to the issue of
current breakouts. They have not been running away from us, but they have been
pushing through their resistance on very heavy trade. After that point, the
overall market has dictated their action.
Take a quick look at Apollo
Group
(
APOL |
Quote |
Chart |
News |
PowerRating), one of my
service’s recommendations. The stock initially broke through our Buy Point
on August 15. We took some profits and gave the remaining position room. It
needed the extra room because the stock sold off with the market over the past
week and a half. The instant the market poked its head up, the stock rallied a
quick 3-1/2 points.
While the rally was good to see,
leading stocks don’t usually act like this. They move higher and consolidate
on their own regardless of the intraday or intra-week market action. Take Corinthian
Colleges
(
COCO |
Quote |
Chart |
News |
PowerRating) and Engineered Support
Systems
(
EASI |
Quote |
Chart |
News |
PowerRating) for example. These stocks moved higher right out
of the gates this morning and eventually the market followed.
Until growth stocks and breakouts
start to move higher, consolidate, and then move even higher, it will be
important to trade them accordingly or stay out all together. Making money is
always secondary to preserving the capital we already have.
If this is the beginning of a new Bull
Market, plenty of opportunities will follow. If the market does roll over once
again, then preservation of capital will be important while possibly profiting
on the short side.
For now, have a relaxing holiday and
don’t forget to take a few minutes to keep track of the market and any
leadership that is out there. I’m off to enjoy a weekend in San Diego for a
much-needed vacation!
See you next Tuesday,