What’s Going On?
The
interesting thing behind this market is how it shows blatant signs of
distribution and then proceeds to rally on increasing volume!
Leadership sends out the same
confusing issues, some recent breakouts fail and others hold well above their
breakout levels. Some new names are breaking out and hanging on, and others are
unable to march forward. Despite all of these confusing issues, these are all
great signs. (Hard to believe, huh?!) It didn’t quite make sense that after the
worst Bear Market ever (in the Nasdaq), we would just rally straight up, buy
breakouts and make 500% returns.
Now the market is making it more
difficult to produce profits, as it should be. This is where it is extremely
important to have sound money management and rules in place. If something looks
perfect, then a purchase needs to offer a great amount of reward, while
requiring very little risk. Otherwise, it may be important for conservative
investors to wait until further evidence that the market is under accumulation
and growth investing is working.
Elan PLC
(
ELN |
Quote |
Chart |
News |
PowerRating) has been working, but
the verdict has yet to come in as to what extent. It has been up as much as 10%
on the recent breakout, which equates to about a 4 to 5 risk-to-reward scenario.
If you’re taking 8% losses, you need to be correct about every other trade in
order to survive.
King Pharmaceuticals
(
KG |
Quote |
Chart |
News |
PowerRating) has fallen
slightly below its pivot, and posted one day of distribution…not what you
would like to see on a breakout.
Technically, Sicor
(
SCRI |
Quote |
Chart |
News |
PowerRating) looks the
best so far in regards to recent breakouts as it has managed to punch through
its pivot on a 325% increase in volume. Advent Software
(
ADVS |
Quote |
Chart |
News |
PowerRating) struggles with
its attempt to move higher. A select group of leaders has been able to hold
above their 50-days.
Americredit
(
ACF |
Quote |
Chart |
News |
PowerRating), Krispy Kreme
(
KKD |
Quote |
Chart |
News |
PowerRating), TRC Companies
(
TRR |
Quote |
Chart |
News |
PowerRating), Metro One
(
MTON |
Quote |
Chart |
News |
PowerRating), Express Scripts
(
ESRX |
Quote |
Chart |
News |
PowerRating),
Quest Diagnostics
(
DGX |
Quote |
Chart |
News |
PowerRating), FEI Company
(
FEIC |
Quote |
Chart |
News |
PowerRating), and Renaissance Learning
(
RLRN |
Quote |
Chart |
News |
PowerRating)
among a few others.
These stocks could provide leadership for another leg higher and should be
watched.
Separately, the building stocks are
coming back to life as they punch above their 50-days. For now, either trade
with strong discipline and be willing to cut losses quickly, or wait for
confirmations that buying is being done with conviction, and not just a bounce
into the Fed meeting on Tuesday.
Have a great weekend,
Â