Today though, I want to take a look at a little longer term view. We are going to be looking back a year or two at some weekly bar charts to try and gain some perspective on these recent, impressive stats.
The SP500 will be testing some very important and significant resistance very soon. Not only are the all-time highs just above, but the intermediate term trend channel resistance is also right there. Our short-term head/shoulder pattern has us moving ever so much closer to those levels. I try not to get ahead of myself too much with these strong up trends, typically I need to see some significantly poor trading action before I would want to sellout in a trend this strong. But there are times during even the strongest of trends where it is smart to tread lightly and we are approaching one of those times.
That doesn't mean I going to sell everything as we near this resistance, but it does mean you should reduce exposure to maybe 50% or so. I am a long term believer that the market will continue higher, but there will also be times during that period where you will not want to hold too many stocks. Now is not that time; stocks right now should be considered a strong percentage of your savings in my opinion, but I don't like the idea of putting too much new money to work at these levels for anything more than shorter term trades. To build long term positions, there will be better entry points in the near future. I am pro short term trades, intermediate term holdings, and saving some cash up for a time when the sky seems to be falling a bit more.
Here's a few thoughts about some of our watch list stocks:
DDD
Once super hot, DDD has now cut roughly 40% off of its share price since late January. For a long term investment (as you know from previous posts I am a believer in 3D printing) this is exactly the kind of opportunity you want to look for. If you have conviction in a stock and believe the long term story, you want to be a buyer on significant price weakness. I liked this stock at $50...I REALLY like it at $33 and change. I am stalking this one for an entry and it seems to be approaching fairly significant support around the $30 area. If $30 breaks down easily then we will step aside a bit longer and continue to watch.
For anyone wondering why the price scale in DDD has changed so much from earlier this year, its because they just underwent a 3-2 stock split. Simply meaning for every two shares you owned prior to the split, you would now have three and the share price would be 1/3 less. It really changes nothing in terms value, its simply to make the stock trade more liquid (more shares available for a lesser price tag).
AAPL
Still getting clobbered and making lots of new lows. I do think this will present very compelling value when it finally settles out, but right now it just keeps creating new levels of resistance as it trades lower.
MOS
After failing at resistance earlier this year MOS has been able to stabilize itself at key support. Price still made a higher low in late 2012, then a higher high and now another higher low. Also impressive is how it held key support so well. The 20 and 50 week averages, and the 38.2 retracement level were tested. As long as the recent low holds, I think the thesis we had at the beginning of the year is still intact.
HD
Sigh...Another one that slipped away. If only I would have taken more time with reviewing this position I could have looked at this chart and still felt very confident in the holding. Instead I got preoccupied with the short-term and lost perspective on the bigger picture. Aside from that, HD continues to make new all-time highs and I will be looking for the next retest of the trend support to reenter.
F
Ford is at an interesting juncture here. It pulled back below the key $13.00 level and is now trying to retest the level. The uptrend is intact still and we want to see a resolution back above 13.00. Possibly seeing a bull flag formation here, again the 13.00 level will be key for a breakout.
WFC
Wells is back testing its 2 year highs which is good. What isn't the best is that the price is not being confirmed by momentum. As you can see the MACD is putting in lower highs while price is back at its highs. This is a divergence and doesn't mean too much yet,but if Wells struggles it could breakdown faster than normal. Which leads to our next chart...
JPM
Bonus chart of the week is JP Morgan Chase. This chart is to compliment the WFC analysis and an observation I have made. I like stocks that perform the strongest for owning and trading. In terms of Relative Strength, JPM is outperforming Wells and the SP500 by a healthy margin. Plus JPM has already taken out its prior highs and has shown good breakout follow through, while Wells is still testing. You can also see how momentum has not dipped in JPM as the MACD still looks strong.
To be clear I still like Wells as a long term option, but I am favoring JPM for now and have switched them in my own portfolios. JPM has a higher risk profile than Wells, but also has stronger overall action and the nice thing about trading is that you can change horses mid-race to make sure you are behind the leader. There may be a time when Wells starts outperforming JPM, and when that time comes we can simply adjust our holdings to match the strength.
HAIN
As we discussed in our recent chart patterns post, HAIN has a couple tough tests ahead of it in the short term. There are also some tests with the longer time frame that are appearing. Both the 20 and 50 week averages are just above and could provide some resistance. We are seeing the long term relative strength ratio testing key trend support, that will be important to hold for the strength of the rally. Lastly, HAIN seems to be creating a trading range between $63 and $52.50; remember from our range trades lesson, a resolution of this range will be the most important factor in determining the next intermediate move.
No comments:
Post a Comment