Just when it looked like the market was going to possibly start a summer rally, the British decided to exit the EU, and that sent global markets reeling.
The decision had our Dow close down 600 points on Friday, and that of course put some severe pressure on our individual holdings.
It days like these when one can clearly see which of their holdings have technical strength versus those that don’t.
As I continually preach, you should sort your current holdings from the technically weakest to the strongest. This exercise will best prepare you to be able to more quickly cut your weaker performers, as those should be the first to go. You should always prune your portfolio by trimming the weakest first, while leaving your stronger acting stocks to possibly ride out the corrective phase of the market’s perpetual bullish to bearish cycles. Once the market turns back up, those stocks should continue their advance, building more and more of a profit.
To sort your stocks properly – watch your holding’s daily price/volume action. I call this the stock’s vitals. Consider the daily price action along with and compared to the daily volume. A stock moving up with an increase in volume (+1.2%/+65%), is good, while a stock trading down with a rise in volume (-2.3%/+56%), is bad. Simple as that.
Also, see how shares behave if the stock pulls back to certain support areas. These are price points such as the previous highs of a base, an upward trendline, or more importantly the 50- and 200-day moving averages.
Generally speaking, positions which are selling off on volume are technically deteriorating, those which are breaking support are triggering sell signals.
Don’t follow what may be conventional wisdom and sell a winning position – just arbitrarily or because it is up and you will feel good taking a nice profit. Also, don’t hold a losing position with the hope it will come back. Losing positions should be cut as early as possible, and always strive to never take a loss of more than -8% below your purchase price.
When your stock pulls back, see if it is declining in a down market or against an up market. If your stock is lower while the market is moving higher, that is obviously not good. On the other hand, if the market is down big (like on Friday), you should expect your stocks to be struggling at the least as well. Those stocks which hold up should be noted.
After Friday’s carnage, here are our top 15 strongest stocks in descending order of their breakout date.
#15 Thursday 6/16: BreakOut
STORE Capital Corporation (STOR – NYSE) P/L: +2.74%
STORE Capital is a privately owned real estate investment trust. The firm invests in the real estate markets.
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