Today was another rough day for the market as market leaders such as Apple (AAPL) and Priceline (PCLN) sold off and the NASDAQ had yet another distribution day as it closed once again back below its 50 day moving average.
Apple's 4% tumble today was its largest single day drop in six months, Priceline's 5% loss its largest in five months. I have covered both of these stocks recently with analysis and key areas to watch, see here for Apple and here for Priceline. Further analysis at Bespoke.
StockCharts.com posted a good blog today about finding winning stocks and the qualities they most often possess. From the post (emphasis mine),
To use a baseball metaphor, I touched all four bases in my winning trades:
- First Base: I bought when the market was trending up.
- Second Base: I bought into one of the top two performing sectors.
- Third Base: I bought into one of the top performing industries in those sectors.
- Home Plate: I bought the best stock in the industry group.
The bottom line is simple. Focusing simply on stock selection for buys may make for scintillating conversation at cocktails parties but it is unlikely to put real money into your pocket. It's like running the bases backwards. It's good for a laugh but the scoreboard will ignore you. My interest is - and always has been - how to buy properly in order to increase the probability of taking money out of the market.
This is similar to the CANSLIM style of trading, which focuses on following the overall market trend, finding the best performing industry groups, then buying the best stocks (aka leaders) in those groups.
Updated analysis below. Remember trimming exposure, raising stops, and overall raising cash is not a bad idea at this time until the market can regain some better footing. As I said last week,
Raising stops and perhaps some cash at this time is worth a consideration, even more so if/when we see an oversold pull back.
Stay frosty out there!