Time To Reflect
Hmmm. Today’s
action provides a time to pause and reflect on this great market that has been
steamrolling ahead but offering very little in the way of entry points.
The major averages have been acting well up to this point. It would have been nice to see volume come in a bit heavier on
yesterday’s turnaround rally, but who am I to complain?
As I write this (
heavy. This would indicate a
distribution day if we were to close at these levels. Fortunately, one distribution day after the rally we have seen is only
something to take notice of, but not much more.
If these days begin piling up, I would be worried about this rally.
Obviously, if the market reverses, there is nothing to worry about
concerning the major averages. A
strong finish is always welcome!
The thing that bothers me the most are the lack of opportunities. Popular publications have touted breakouts in the medical and gaming
sectors to name a few and painted a wonderful picture filled with profits. Sure, there have been some small trading profits, but nothing we can
ride higher without breaking some rules.
Rule #1 is not to buy stocks until we see that the market is under
accumulation via a follow-through day. The
FTD occurred on 10/15 and several of the biggest winners broke out before
that.
Forest Labs
(
FRX |
Quote |
Chart |
News |
PowerRating) moved through the pivot of 85.10 on 10/1.
American Pharmaceutical
(
APPX |
Quote |
Chart |
News |
PowerRating) moved through
its pivot of 17.76 on 10/10.
Coventry Health
(
CVH |
Quote |
Chart |
News |
PowerRating) moved past its buy
point of 34.80 on 10/14.
Should we change the rules? Absolutely not
under this circumstance. If the
market failed to produce a FTD and wasn’t under accumulation, it could have
taken a hit and leveled stocks attempting to make new highs. Our goal is always to invest when the best chances for success are in
our corner.Â
The only other opportunities were foggy at best. Int’l Game Tech
(
IGT |
Quote |
Chart |
News |
PowerRating) kind of broke out of a base between 10/15 and
10/17, but didn’t get moving until yesterday.Â
Not to mention that the base doesn’t offer a completely confident
structure.Â
Penn National Gaming
(
PENN |
Quote |
Chart |
News |
PowerRating) also comes from the gaming
industry. The stock attempted a
breakout yesterday, but is being turned back today.Â
Dentsply
(
XRAY |
Quote |
Chart |
News |
PowerRating) tried to break through its pivot of 20.28
on 10/17, but has since run into some major trouble, knocking it out of the
picture.
Right now, there isn’t much of anything happening in
the growth arena despite the market’s recent rally.
If the market consolidates and then continues higher, leaders will
eventually emerge. For now, they
are not quite ready. One stock
that was mentioned in my services was Cognizant Tech
(
CTSH |
Quote |
Chart |
News |
PowerRating).Â
It broke out on 10/17 by gapping higher following an eight-day advance. After taking time to consolidate and offering an extremely shaky
breakout situation, it is moving higher. We no longer have the stock, but it is a rare example of what has
worked out there.
I wanted to paint an honest picture of what I see and am
doing out there. Other than small
positions in the QQQs and SPYs that were mentioned in my
service, I have
been relatively quiet. I am
waiting to see strong stocks emerge that I can move into. For now, there are very few on my screens, but all of that can change
very quickly.
We’ll revisit this on Thursday,