What You Need To Do In This Stock-Picker’s Market
Another
glorious day in the stock market!
I’m not saying I made money hand over fist, but I am
saying that there’s nothing to complain about in the market right now. The last two days’ action has been flawless, as we have declined
while volume came in lighter each day.
 
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Two numbers that say a lot
are 11.54% and 4.61%. They are the Nasdaq
(
$COMPQ |
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PowerRating)and S&P 500
(
$SPX.X |
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PowerRating)
returns, year-to-date, respectively. A
pullback and consolidation is necessary to digest gains like that.
It will also give time for stocks to set up and get ready to break out.Â
Yahoo!
(
YHOO |
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Chart |
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PowerRating) is a prime example. We’re
seeing a nice, low-volume consolidation with a breakout point above 26.25.Â
The company just posted a 300% increase in quarterly earnings over last
year, same quarter and sales are 47% above the year before.
Return on equity is a little light at only 6.54%, but it is
consistently expanding.
During this pullback in the
market, some stocks are getting hit. Brown
Shoe
(
BWS |
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Chart |
News |
PowerRating) was a perfect example in today’s session.
 
A stock like this shouldn’t
scare anyone, unless you have a portfolio over $100 million and may not have
been able to get out. It just goes to
show how this market should be treated right now.
It’s a stock-picker’s market, where partial profits should be
locked in fairly quickly. There is
nothing wrong with holding the remainder, but at least a mental stop should be
used.Â
This method of trading
combines short-term and intermediate-term and has been a good way to invest
during the questionable rallies of the last few years.
The largest demand is keeping a current watch list to put money into as
you are liquidating partial positions.
When we start to see a stock
like University of Phoenix
(
UOPX |
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Chart |
News |
PowerRating)
push through key secondary levels like 46 on heavy trade, it may be time to
hold a larger piece of the initial position. In
this case, the stock finally went through resistance at 46, only to produce no
volume to support the move. Consequently,
it is trading back down to 44 as investors sold shares.
 
As always, keep a close eye
on the price-and-volume action in the major indices for any signs of trouble.
Even if you are avoiding a certain new purchase on the watch list, keep
an eye to see that it pushes through its pivot point anyways.
The action will speak very loudly and represent the overall health of
breakouts.
Have a great weekend,