We just witnessed best trading week since 2013, that is quite a supercharged TAPE.
You asked ....how supercharged was the TAPE ?
In last 7 trading days we went UP 144.61 points in S&P 500 or gain of 7.94%...this type of TAPE action is extremely rare......
It is important to analyze these things closely as we get oversold & then overbought very quickly.
We may be near top end of this trading range......
We need to digest gains and sideways to lower movement is necessary.....
Earnings are getting in overdrive mode now & reaction has been company specific which points to stock selection.
Some stocks have not recovered in this sharp runup and need to be pruned out.
It is not that your stocks are not among strongest, but they must not be weaker ones.
European Bank stress test are out and may have their own reaction, 25 banks failed & 10 need to raise cash.
FOMC statement may show that they are concluding their bond buying, market may not react well.
SO, factoring huge reversal without any test or retest of support, calls for neutral to negative bias.
What strategy to adopt in the above scenario, buy strong stocks on weakness and limit exposure.
Do not be overexposed in one sector, diversify in many.
Comfort level needs to be very high in this TAPE.
2014 has proven that expectations needs to be tempered, as we are barely UP for the year and year is ending in another 9 weeks......
We have entered a challenging markets since start of 2014 and it may remain so for another year.
BLOG does NOT give buy or sell.
Saleem
14 comments:
Hey Saleem,
I find the weekends ever more busy with house/yard and kid obligations. I'm sorry I was not able to do a full writeup again this Sunday.
The portfolio was up only 2.12% versus +4.12% for the S&P and +3.37% for the Russell 2000 due to the underweight allocation (still only 64.5% invested after many additions). Big gainers were the early-week purchases of PANW (+8.0%), PFPT (+9.1%), and SPLK (+13.5%). The later week purchases didn't work as well.
You are very right that weak stocks need to be pruned--that was the biggest takeaway from my weekend research.
Stocktrader
Hey Saleem,
Sold JKS @ 22.95
Sold GM @ 30.15
Stocktrader
Hey Saleem,
Bought BALT @ 3.697.
The $BDI continues to spike and BALT got an upgrade and $6 price target today. Dry bulk shippers are traditionally strong in Q4, so I thought I'd give this trade a chance despite it being so weak recently.
Stocktrader
Hi Stocktrader,
Good luck with BALT.
TAPE is treacherous, thus strategy and stock selection needs to reflect that.
Saleem
Wow. Ebola had little effect on airlines.
Sold RAD just now 4.8. I'm all cash again.
I fear oil could pull down other stocks again. The talking heads are saying, "sell the bounce", but maybe things rise by the end of the day anyway.
Hi Firebird,
Dont be reactive, have a plan to execute and stick with it.
Saleem
Wow. CVS and RAD have rejected Apple's pay system.
The two drugstores are part of a consortium developing a competing payment system. Interesting!
I'd normally expect Apple to win the battle, but a new iPhone 6 costs upwards of $750.
Hi Firebird,
iPhone always cost in that neighborhood.
AAPL is a good company and will win with ipay.
Saleem
Hi Saleem,
I've just been flipping RAD. I'd bought it lower.
The few stocks/sectors I'm familiar with just aren't good to buy right now.
One thing I'm trying to figure is what to expect from the housing sector. And I don't like the dollar weakening.
Hi Firebird,
Housing sector does well in Q 4.
Saleem
Hi Stocktrader,
Added 15% EGO @ $6.92.
Saleem
Hey Saleem,
There are rumors of consolidation in the space. I like your pickup right at the 200 DMA here.
Stocktrader
Hey Saleem,
Sold PFPT @ 38.537 to take profits.
Although their results were nice, I do worry about a peak in growth in this competitive space. Their acquisition could prove nice, but it won't really impact earnings until late next year at the earliest.
The price action today turned from good to bad in a hurry.
Stocktrader
Hi Stocktrader,
Booking profit is good.
Good luck with next move.
Saleem
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