I would love to hand you a helmet and a flak jacket and say prepare for the worst. Yesterday, EBAY dropped 6.7%, Intel 3.7%, Sherwin-Williams 8.3%, Amphenol 9.7%.
Marketwatch.com's home page has numerous articles with titles of “Google shares tumble after profit, revenue miss targets”, “Microsoft feels PC pinch…”, “The party may be over for tech stocks”, “Intuitive Surgical's slide continues…”, and “Nokia downgraded, Verizon, Qualcomm fall”. Now this is hours after the Dow closed up 78 points.
But looking at individual stocks, I find many still showing strength. Many top-name tech stocks have been selling off. But the money may not be going to the sidelines, it may be rotating into other sectors.
Even within sectors, earnings disappointments may merely move money from one stock to a stronger stock. AutoNation, a holder of 221 new/used auto dealerships, reported earnings above estimates, but apparently below expectations. AN sold off on high volume, although it recovered to close down just 1%.
But if you look at Carmax (KMX), AutoZone (AZO), or Borg-Warner (BWA), you'll see AutoNation is the exception. In fact, if you like to see insider purchases, two Directors of Carmax, another operator of used car dealerships, have recently bought nearly 2 million dollars worth of their own stock. Other officers are exercising stock options, which is not unusual, but they are selling only a portion of their exercise – in other words, effectively holding on to most of the stock because they think it will be worth more. Seven AutoZone Directors recently purchased between 118 and 132 shares of the stock (at $425 a share, or about $50,000 each). Apparently their board decided they personally should have more at stake.
Johnson & Johnson (JNJ), Union Pacific (UNP), Illinois Tool Works (ITW), VF Corp (VFC) and Pepsico (PEP) are showing the strength that Intel (INTC) and Microsoft (MSFT) aren't.
Focus on more conservative, basic economy stocks, and you can ignore the “party may be over” headlines. Build a portfolio of solid lower-risk companies and consider regularly writing covered calls against them to lower the cost basis of each one. As an added bonus, many of the basic economy stocks are paying good dividends (for example, JNJ is paying 2.9% and PEP is paying 2.6%).
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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