In the October 10th Seasonal Forecaster newsletter I stated “I would be inclined to believe a major sell-off is in the works if I saw indications this earnings season may disappoint, or major stocks are dropping on heavy selling. There are companies growing strongly. Many are able to deal with the less-than-stellar economy, the regulatory burden, and the skyrocketing healthcare costs. “
I looked at yesterday's earnings announcements. Briefing.com lists 38 companies that announced before the open, and 21 that announced after the close. Of those 59 companies, 47 reported earnings that met or exceeded the consensus estimates. This is just one sample, but it doesn't appear to be evidence of ‘disappointing earnings'. In fact, a quick check of a few days earlier shows similar results. Maybe it will be a better-than-expected earnings season.
In the October 10th article, I focused on one of the best companies, Actavis (ACT), and gave a roundup of their strong fundamentals. But ACT was showing something that I was seeing in many top stocks:
“The only problem with this stock is Stochastics refuse to drop into oversold territory, which would create a back-up-the-truck buying opportunity, like in early 2012.“
The market may rebound from here. There are a number of quality stocks that showed strong buying over the past two days, as institutions are apparently bargain-hunting.
But for a true, ‘back up the truck' buying opportunity, even the best stocks may have to fall quite a bit more. ACT for example is still relatively overbought, on the weekly chart:
Two more top stocks show similar resistance. Polaris (PII) and EcoLab (ECL) are either so strong they are ready for further gains, or they will be the ‘generals' that will finally fall.
Let the market sort things out. There are some good bargains right now, but only if the institutions come in and resume buying. For now, enter only small bullish positions with tight stops. If the market rebounds strongly off the recent lows, then you can add to your positions as confidence returns and institutional accumulation becomes evident.
If the selling continues, then step aside and wait for weekly Stochastics on top stocks to fall to oversold levels and then start to rebound. At that point, you can back up the truck and load up on bullish positions.
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, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 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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