Correction Continues: Strongest Stocks Hold Up

It was tagged as the worst month for the market in well over a year, as stocks closed out August lower. During the final week of trading, both the Nasdaq Composite and the benchmark S&P 500 index each lost -1.9%. The Dow Jones Industrials (-1.3%) continued its downtrend, while The New York Stock Exchange closed at a new recent low, losing -2.2% ahead of the long holiday weekend.

We had no new breakouts from our watch list and that has been the theme for the past several weeks. That, on it’s own, has cleverly kept us from doing any new buying by default. Our most recent breakout, SSYS which triggered our technical buy signal on Aug 8th, has now traded higher for five consecutive weeks, adding another +1.4% this week. This has allowed me to now raise our 1st SUPPORT LEVEL up for investors form $93.50 to $95.00.

As I scanned stock charts for the week, I noticed other market leaders were breaking their respective support levels this week, and that is obliviously a sign of the weakened environment. Luckily, our freshly pruned list of leaders are all thus far holding up. Our current holdings from the previous rally (MX, JAZZ, TRIP, PKG,YNDX, EVR, and SSYS) are performing well technically, while maintaining their high ranks and at the least, decent fundamentals. MX, had a decent day on Thursday with a +2.6% gain to new highs and still trades with no real concerns. There was also JAZZ‘s +3.6% advance for that same session, to a new high close. Meanwhile, our TRIP continues its recovery by adding another +3% this week, while PKG traded light volume (worry-free), and above support. Our other solid winners, YNDX and EVR were defended at their respective 50 day moving averages. Finally, we have the aforementioned SSYS.

As regular readers know, we recently had cut covering any of our Portfolio Stocks (from the table below) that were noted here previously as being the weakest. As the market corrects, we always strive to first prune any selections which may be acting the weakest. Stronger selections, which behave well and properly consolidate above support, could be most poised to again break out to new highs while the new broader rally resumes.

At the start of the week we had a total of six stocks on our watch list. All six ended the week lower. Not a big deal as these stocks are only on our watch list and not our current holdings, yet we do note the action. It is always worth at least a quick study of these high-ranked stocks as they are setting up in technically sound bases of consolidation. Premium Members can get detailed trading criteria for those six potential buy candidates, along with access to their annotated charts, in the table below.

At this point the market continues in its latest correction phase. The half-hearted, lighter volume gains of the week previous were not enough to forge the start of a potential turn-around. We now clearly have the Dow, as well as the S&P 500, trading below their respective 50 day moving averages on a daily basis. Not much we can do, except of course, mind any current open positions. We’ll watch our stocks as they re-open on Tuesday, being defensively stanced, as well as partially sidelined.