As measured by the major indexes, the U.S. stock market inched up again to new highs. Not as apparent, however, are many stocks having peaked and beginning moves downward – they may simply be uncorrelated to most stocks or may be the “canaries in the coal mine”, the first stocks to suggest the market is running out of momentum and headed back down soon.
Quite a few new weekly highs among our stocks, but as mentioned above there were also a number of longs which declined abruptly and significantly. It remains – as always – a “stock picker’s market” as trades this week are split between stocks reversing to the upside and reversing to the downside.
Our review of key behaviors of successful traders continues this week with an emphasis on trusting the stock list:
Embrace the stock list – the stocks on our list are there because they are the most dynamic of thousands of NYSE and Nasdaq National Market (NQ NM) listed stocks. These stocks have shown over the past 24 months the greatest propensity to change significantly in price in as smooth a manner as is possible – either upward, downward or oscillating among the two directions – and in sufficient volume that most brokerages have enough shares in inventory to fulfill short orders (a profitable trading pattern alone is compromised if sell short opportunities are not available due to lack of borrow-able shares). By focusing our capital in these stocks we are setting ourselves up for the greatest potential trading returns while also avoiding the majority of stocks that will never provide much of a return because their trading patterns are either stagnant or so erratic than even the best analytics can make no sense of them, (the “time wasters”).
Because our search for these highly productive trading patterns takes place among all industry sectors and capitalization levels from micro-caps to large caps, the resulting list will include many stocks that may not be familiar to you.
We recognize it takes a leap of faith to commit your capital to stocks with names you may not have heard of before and/or in sectors with which you may not be familiar. But just remember when you see a “new listing” that it is there for a very good reason – it has produced the most profitable trading pattern among all stocks in recent months and will remain on the list as long as it continues to do so.
So, as you make choices for your personal portfolio: 1) don’t overlook, or hesitate to take positions in, any of the listed stocks, familiar or not, as they represent the greatest opportunity for large trading returns and 2) any stocks that decline in productivity will be replaced quickly via ongoing weekly routine evaluation.
** An extreme example of last week’s tip about timely trades: analytics detected enough buying activity from chart data to suggest a reversal trade in LMI Aerospace (LMIA), Level 3 edition, from short-to-long, after a relatively neutral 3 week short hold. Last week LMIA rose +51%, the largest single week gain of any of our stocks in 2017 so far. That +51% gain for Level 3 subscribers who acted timely is otherwise an enormous -51% loss for any subscriber who ignored the signal and remained short – hopefully no one learned that lesson the hard way.
Highlights: 11 new weekly highs in long positions. 12 stocks with double-digit long gains:
FIVN +12% ABX +26% IVTY +26% KMT +34% CYBE +47% NEFF +55%
SLW +11% ERF +22% NGL +24% TROX +56%
Locking in long gain of +32% in PIR (14 weeks).
1 new weekly low among short positions. 2 stocks with double-digit short gains:
URBN +17% ATW +23%
Locking in short gain of +23% in AGEN (18 weeks).