Last week markets rallied strongly and were just about to make new highs (Russell Small Caps did make new highs). This week the SP500 gave back 2.2% and almost all of last week's move. So here we are again, back to support and wondering if we will get a shot back up or if there is another wave lower to this unsettling ride.
SP500 (Oct 2014-present) Daily chart
When it comes to managing a portfolio of individual stocks we need to let those stocks shine through. If you want to trade the Averages then just buy the SPY, but if you want to own the best stocks in the best setups you have to let Relative Strength work.
If the market is pulling back and a particular stock is breaking through highs, that should tell you everything you need to know. We focus on strength.
While not much real damage was done due to last week's buffer, our Lg-Cap Portfolio did have one casualty. We are exiting UNP after it failed to hold its weekly closing support and triggered our stop.
-Exiting Union Pacific Railroad (UNP)
While I have little doubt that UNP is and will continue to be a long-term winner, the support failure this week says the intermediate trend will need more time to find itself.
Our goal is to keep losses small and to target the strongest and best opportunities in the market. By exiting UNP here we are limiting losses and raising some cash should higher probability setups present themselves.
Not a single one of our positions finished higher this week, a few outperformed, but all ended up lower. There are a couple in particular that we need to watch as they are approaching support.
While this is not a positive development, the uptrend remains in play as the swing low at 51.64 has not been violated. One more week like this though and we will likely step aside.
Our stops are still out of the way, but it will take several more weeks of price stability to move them higher. The next logical trailing level will be around $82.
At this point my best guess is that it will retest the breakout. That is where I have placed my stop for the entire trade. PCG is still fishing for a higher low.
I am still in the camp that IP works its way higher over time, but it sure likes to make us wait for it.
This one is still working fine that there is nothing to worry about. Our stop remains just below our entry point, so we essentially have a risk free trade in one of the best companies in the world. I'll take that all day.
There has been a lot of angst surrounding AAPL in both the financial media and on Twitter. Traders are worried about giving back profits and are selling prematurely. In my opinion they are picking up nickels in front of a steam roller.
The trend is clearly higher and intact. There is nothing to do but pray it pulls back to build a new support base so we can add to our current positions.
We don't need to know where the market will go in the future to have success. All we need to do is focus on the trends of top performing stocks and own those stocks as they continue to set new highs and higher swing lows.
The less complicated you can make your investing process the easier and more profitable your journey will be. Good Luck Trading!