Morning Market Thoughts

by DAN Good morning. Have you ever found yourself trading yesterday’s market today? No, I’m not talking about finding a flux capacitor and going back in time. That would make you a day late…and several dollars short. I’m talking about sticking with a great strategy that’s been working for a while, but is no longer doing much except slowly bleeding your account of profits made when that strategy was working.

I like trending markets. Frankly, I don’t know many who don’t like trending markets – other than those hapless few who are always trying to spot the top and get there first. While it’s nice to be right, it’s painful to be wrong 17 times before your 18th “this is the top” call finally hits the market.

Don’t be that guy.

Focus on markets, sectors and stocks that are trending. If all three are in sync (market, sector, and stock), you’ve found nirvana. But honestly, those were the good ole’ days. We haven’t seen such synchrony in a long, long time, save for a week or two after a deep correction. You’ve got to trade the environment that you find yourself in. These days, the S&P is in a very narrow trading range – it feels heavy…but it also seems to have a bit of helium left in the balloon. Truly a contradiction in market dynamics.

Here are four stocks that aren’t really trending. So “buy high and sell higher” isn’t going to work very well. But if you can identify support and resistance, and then use those levels to derive risk and exit points, you’ll do ok.

Bluebird (BLUE) — breaking out of a 6 month base. Watch how it behaves around the 200-day moving average.

Robert Half International (RHI) — higher low relative to the June low. But not much sky above — it’s at $36.86 and resistance is around $40.

Universal Display Corp (OLED) — We’ve been tracking and trading this for months, and it’s finally breaking out of a very prolonged high base and springing off the 50-day moving average.

Chipotle Mexican Grill (CMG) — Gotta think that the worst is behind this stock. The recent breakout above the 50-day moving average is being tested. Needs to hold above $420 or the move will probably fail and the stock will need more work.

Anyway, those are just four stocks I’ve seen that have different types of dynamics. Focus on the dynamic that applies to all stocks that you are trading. They are all very different.

See you in the forum, which has been rocking lately.

Dan

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