MarketWatch.com finally got the sell-off it was trying to provoke. The website has had numerous articles over the past few weeks predicting a major correction. Often, there were two or three a day.
Curiously, now that something has happened, the website right now has only one headline proclaiming a correction: “A market correction is ‘definitely coming’: Carl Icahn“. The article evens states “Meanwhile, prominent activist investor Carl Icahn might also have fueled the slide in stocks. The billionaire investor told CNBC that a market correction is “definitely coming,” adding that he’s hedging his stock bets by shorting the S&P 500.”
I'll remind everyone that Carl Icahn doesn't have a 100% functional crystal ball. In fact, another headline on MarketWatch.com currently states “Icahn wins with Apple, but loses big on Chesapeake ”
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.
Take Actavis (ACT), one of my favorite companies right now. Despite its size, this generic drug company has afterburners lit. It's recent revenue and earnings growth track record leaves Apple's (AAPL) track record far behind. What sells better than iPhones? Drugs.
Actavis doesn't stop there. An Investor's Business Daily/MarketSmith Composite Rating of 99, a ROE of 21%, the number of funds holding ACT has increased 14% over the past year, and so on.
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.
In fact, other top stocks suffer from the same problem. Two of my other favorites are good examples. Polaris Industries (PII) and Ecolab (ECL) just refuse to give good weekly Stochastics ‘buy' signals. The best you can do with ECL is add to existing positions every time ECL pulls back to near the 200-day moving average (which it is working on right now).
Perhaps this is a sign that a correction is likely. Institutions may stop buying until many quality stocks offer true value buying opportunities. Or, they may just continue buying good companies like Actavis, accepting the current P/E of 20 as reasonable considering it has a 34% earnings growth rate.
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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