Back in scary territory?
The market is behaving poorly lately. We declined 6 times out of the last 7 trading sessions. What do we make of such action?
Let’s start with the facts: if we observe the price/volume action of the last two weeks, we can clearly see at least some institutional selling in the market. Some leaders have been outperforming the major indices however when the market goes down, 75% of stocks will follow. The current uptrend is therefore under pressure. Technically speaking the market made a bearish reversal on 9/23 and the only up day in the last few trading sessions occurred in very soft volume. Now we are quickly approaching the 50-day moving average and also a key area of support around 1,020 in the S&P. If we hold, there is a good chance of a bounce; if we go through, I would recommend to close most of your positions as we can easily drop to 1,000.
Currently, I haven’t taken any action. I am really waiting to see what happens tomorrow. I would be encouraged to see signs of institutional buying in the case we trade to the upside. No buying conviction would be reason to sell into strength.
My current position in GS is still well in the green. GS has been trading very well lately but today was a bad day for the stock even if volume on the downside was contained. Technically speaking GS reversed from $188 to below $180, rallied back to around $186 and today dropped again below $180. It is now $0.51 below last’s week closing price. It looks like a mini double top pattern at this point and if GS closes below the recent low of $177.70 I am out of this trade.
Also CTRP has been trading well in this last market correction and it is only slightly below last’s week closing price at $57.17. Today’s decline came in volume 40% below average, a sign that the stock was only being sold by retail investors. When institutions are not dumping a stock, there might be a much greater upside potential if the market starts trending higher.
Summing up both of my holdings are outperforming the market this week but any sign of further weakness is a good reason to cash out.