StockTwits 50, September 10
- Posted by Ivanhoff
- on September 8th, 2012
Last week was a perfect example of a euphoric stage in the market – it is very fun to trade as most breakouts stick and a dangerous place to establish long-term investing positions as many stocks are extended from their base. Small caps and high beta names outperformed. Stocks that consolidated sideways in August just broke loose to the upside.
Gold and silver accelerated their upward march while treasuries and the U.S. dollar went into a free fall mode near the end of the week. As a consequence, $SPY closed at levels not seen since 2007 and $QQQ cleared new 10 year highs.
For the week, the St50 index appreciated by 2.05%, basically matching the gains of the S & P 500 and the Nasdaq Composite. Both the worst and the best St50 performer came from the retail sector from stocks that reported earnings last week. $FRAN had quite a run and it was trading at all-time highs before the report. Apparently its results didn’t live up to the expectations and it cratered to the tune of 20% in a very strong week for the market.
Lululemon was on the other side of the performance and emotions spectrum. After spending most of the summer below its declining 50dma and even its 200dma, $LULU closed the week within striking distance of all-time highs.
Earnings reports have often been binary events and major pivot points in the price history of many stocks. $LULU had one of those moments in May this year when it crashed from $80 to $50 in three short months based on cautious commentary from its CEO Christine Day. She was cautious yesterday too, but $LULU skyrocketed 12% on heavy volume. Market mood is very important. You have heard the expression: in bull markets, all news is good; in bear markets, all news is bad as most people are just looking for a reason to sell. It is fascinating how short-sighted this otherwise ingenious discounting mechanism, the market, could sometimes be.
Over the past week, 3-D printing stocks ($DDD and $SSYS) naturally pulled back as they are extended and money left to chase setups with sounder bases and better short-term potential. There is nothing wrong with their long-term trend.
The same could be said about $FRAN and $LF – they are out of the list, but there is nothing wrong with their long-term trend. I won’t be surprised if they take their time to consolidate, setup again, and make new highs in the next 6 months. We don’t have to guess when. When they setup again, they are likely to come back on the list just before they have the juiciest part of their move.
We don’t have to be first or be original in the market in order to make money. There’s nothing wrong in waiting and buying when a stock has already established its long-term uptrend and it is just breaking out to new highs. The momentum market approach is similar to using Samsung’s strategy in electronics – we are borrowing the brain and capital power of the smartest people in the world and buy already established market leaders. The difference is that you don’t have the downside of someone like Apple suing you for using their approach. What in the patent world is called copyright stealing, in the market world is called trend following.
Many of the current St50 stocks look extended and need a break. A near-term pullback will not be a surprise. We already saw clear signs of profit taking and distribution on Friday in stocks like $MLNX, $PCYC, $DDD, $ACHC, $CSOD, $CALL, and $ULTI.
Some of the better looking risk/reward setups for next week include: $N, $COR, $ALLT, $OSIS, $ASGN, $XXIA, $CTRX, $ALNY, $PZZA
See the daily charts of the St50 stocks on finviz; also weekly charts. Take a look at the About section to gain my perspective on how to use the St50.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!
St50 Sep 10 New Sep 10 Removed Sep 10
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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