Gold Stocks, Medical Stocks, Food Stocks Are Showing The Strongest Current Patterns In This Downtrend; Some Fear Is Getting Whipped Up In Some People I Know. Is At Least An OverSold Rally In The Cards?
July 14, 2008
The people that beat the market year-in-and-year out, unlike the foolish “talking commentators” on CNBC say, are the investors that buy the best stocks in the the best sectors in the strongest markets. At the same time, the greatest of those traders learn how to sell short stocks when the market is in a downtrend like it currently has been since the November highs.
While it has not been the most steady downtrend it did have its moment from November to January where our personal shorts did very well, including one member who was 15 for 16 for this short one day one week and the next week 20 for 21. I sadly did not “load up” on my best shorts that fell 30% to 50% during this time frame. However, I did have enough winners to not go red.
If we are starting another fresh leg in this downtrend, the new shorts (around 25 positions now) are going to do very well because the stocks I have gone short are showing some very extremely heavy distribution on their weekly charts compared to the volume on the uptrend that in some stocks lasted from the year 2001 to now. The way these stocks are rolling over and selling off on extremely heavy volume could lead to some massive potential gains. The question is if the stock market will selloff in a strong trend like the November to January period. If this is the case, I will be excited for my short positions as they should do very well. Hopefully we will get some CBEY, SIGM, SHOO, GRMN, LFC, COH, SGMS, and TSRA moves just like we did during our November to January selloff. We were short all of those stocks and I think if you study those patterns, you can see quite a few stocks setting up, NOW, in nearly the same exact patterns.
Not only do the best active-investors get short the weakest patterns, after huge prior uptrends, in bear markets, and get long the strongest stocks with the best fundamentals, in the best sectors, in bull markets, but the greatest of greatest active-investors can also make money on the long side while the overall market is falling. This is done by going long the few strong sectors that are moving higher while the overall market is moving lower.
Recently, the market has gone nowhere, making it near impossible for EVERYONE (including the greatest ever–they go mainly cash just like we did) to make money. We did have DGLY and PDO (which were still minor disappointments as in a bull market each would have easily given us 500% gains) but too many AEHR, ACM, BRKR, BKE type of movements came from beautiful patterns. While very strong CANSLIM stocks (mainly from tech and oil/energy/metals) have saved our 2008 and left many of us with small gains to medium gains and even with some with small losses instead of BIG LOSSES, the problem is that this year and the last half of 2007 have been by far the worst period for buying momentum stocks with beautiful patterns. But like I said, one more time, thank God for CANSLIM stocks. Stocks like MTL, FSLR, NEU, CMP, and many other oil related CANSLIM stocks have given our portfolios much needed relief.
Speaking of relief, some of you have been completely lost for long ideas since no one clear sector, besides oil (which many of you are sick of LIKE YOU SHOULD be–they have been running since 2000/2001;that is when I started buying them) and energy that have produced stocks to invest in. However, now, after running my long scans that pick up only the strongest stocks in the strongest sectors, I am starting to see a lot of stocks in two particular sector build some very nice ROUND charts. Most of these stocks have very strong fundamentals and you can find these stocks moving up the new 52-week high list. In the medical arena, I will leave that up to you. But AEM, ABX, AUY, CCJ, NEM, BVN, GOLD, GG, and a few other stocks that are on the new high list sure would be under my accumulation if I was running a large fund with a lot of assets. Gold stocks are back and I think the actual chart of the August Gold contract shows a nice round base that is clearly ready for take off.
Now if these stocks all breakout and reverse that would be a major top and could be bullish for our technology, retail, and bank stocks that I will be looking to selloff and base in green to max green BOP charts. I am hoping that the big-cap oil, metals, ag, and chemical stocks will selloff with the beloved GOOG, AAPL, RIMM, and BIDU. And I must say, all of the big-cap oil stocks and GOOG, RIMM, AAPL, and BIDU all look to be making clear weekly topping patterns. Why am I not short the four horseman? Because I was already short these stocks, with some giving me some great gains, but with too many not setting up in VERY BEARISH patterns like the twenty-five short positions I have put on now, why should I get short something that even though I believe will move lower might not possibly fall as far as the stocks that I have with these really ugly patterns. I’ll take a 50% gain in a short like CBEY that I was not expecting over a 25% fall in a GOOG short that I have been just dreaming of putting on to prove to everyone these four stocks are NOT invincible.
Overall, to keep it real simple, unless you KNOW IN YOUR HEART and have evidence via your portfolio statements and account balances that you are a great active-investor, you should not be going short the ugly big-cap stocks or going long medical, biotech, gold stocks that are fighting the overall trend and are actually rising QUITE NICELY in this market. There are some very pretty gold stocks that I am not long yet but if they would pullback into one more base, with green BOP, with the volume on the pullback low and the breakout volume high, I would LOVE to get very long some of these gold stocks. But still just because I am doing something and want to do something doesn’t mean you should piggy back my trading ideas. For all I know, since NO ONE knows the future, these gold stocks might stop setting up and breakdown on huge volume. If they are pulling back but you can’t see that it is on big volume, you might think i might be buying something that instead I would be dumping faster than I could press all the “close position” buttons.
Be very careful out there in this market. If I can think of anything else to add to the analysis or see anything else that interest me to the point of “I gotta tell you this…,” I will add it to the comment section below. But for now I am too tired to continue to write and I must give the longs/shorts analysis my full devoted awake attention. Thankfully, when it comes to my open positions, it doesn’t take much to wake me up. And what is up with me buying too much GLRE in a small account while not buying DMLP or IXYS in the same small portfolio? Why after 12 years do I violate my own rules about buying stocks right at the 50 DMA when you have small accounts? I know I am not used to running small amounts but I love to show people how even after twelve years of almost non-stop working on making yourself a better active-investor you can still make silly mistakes. Luckily this isn’t costly and in the next uptrend I will make it up A LOT. ALOHA and I will see you in the chat room where hopefully the staph in my foot is almost completely healed so I can go surfing again in the next couple of days. Not like there has been any waves like this though.
See you in the chat room!!!
Comments
1 Comment »
Agree here with “RevShark” completely!:
….One of these days we’ll get a decent oversold bounce going, but the news flow is just so poor right now that every little rally is being hit with selling.
The dilemma is that we are too oversold to be pressing shorts but too lacking in buying interest to be pursing longs. There seems to be a little less anxiety to call another bottom today, but the serial bottom calls are still out there and waiting anxiously to do their thing once again.
….At least tomorrow we have some earnings reports to consider, but until we can end this obsession with financials, it is going to be tough to get much upside traction going. Once again, the trend continues down, but this is getting awfully extreme, and it won’t take much to cause a bit of a short squeeze.