Breakouts are not working. They are not following through. Take Disney, a stock that usually posts strong gains this time of year. Over the next 12 weeks, a period that goes into the middle of January earnings reports, DIS has gained an average 9.1%, with gains in 24 out of the past 29 years.
Disney showed potential to do it again this year. DIS tested the 67-68 area 4 times this year before breaking above it a week and a half ago. Now setting new highs, DIS should be taking off and running. Instead, the breakout has faltered and volume has fallen off.
Disney is due to announce earnings after the close on November 7th. It does not look like institutions are expecting overwhelming results.
With earnings due before November 5th's open, CVS stepped up to new highs. But again, volume quickly fell off.
Estee Lauder just poked to a slightly higher all-time high, then got pounded down after issuing mixed guidance along with earnings that beat expectations.
So we have a traditionally strong period where institutions are usually active participants, but this year we're seeing breakouts flail and flounder about or outright fail.
Many other stocks have been trading lethargically within sideways trading ranges for months. GS, CVX, DGX, and EBAY for instance. Perhaps an indication of low expectations for the economy over the near future, institutions seem to be reluctant to make big bets. It could also be concern for the still-unknown costs and effects of ObamaCare.
I have never found a way to reliably profit from the stocks frequently mentioned on trading boards and blogs. I have found it reliably profitable to follow the institutions, to understand their motivations and look for their tracks. And right now, during what should be a strong seasonal tendency, I'm seeing minimal participation. At least I don't see significant selling, so far.
Income trades, like covered calls, are a good approach for now. The markets seem to need a boost of confidence.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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