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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • Indices V Individual Stocks - Hold/Sell? 0 comments
    Mar 10, 2013 10:22 PM

    Sunday 10 March 2013

    Few actually invest in an index, like the Dow, S&P, NASDAQ, etc. Most have individual stocks that may or may not be a component, yet what
    everyone hears about are how the various indices performed. "The
    Dow was up/down 80 points, today." "The S&P is near all-time highs."
    The more pertinent question is, where is/are your stock[s] relative to
    the market? If the indices are up but your stocks are down or not up
    by much, what does that say about your portfolio?

    Where the Dow and S&P are at/nearing historic highs, does that mean you should be long the stocks in your portfolio? Because charts do not lie, we decided to look at individual stocks to determine if one should
    buy/hold/sell them. Which stocks? Warren Buffett is purported to be a
    market "oracle," before he joined the Dark Side. Six of his stocks were
    in the news last week, so we looked at three of the best performers.
    Then, we randomly selected several more for an unscientific grouping.

    What little we know about stocks is irrelevant because we know how
    to read charts, and charts reveal what ALL participants are doing, from the most informed with the best and most expensive research, to
    everyone else making a decision to buy or sell. We also know that
    many investors overstay their positions. That may come from the fact
    that Wall Street analysts are loath to issue "sell" signals for fear of
    losing their jobs, even though it may mean investors are losing a lot of
    their money.

    Here is a look at 3 of Buffet's holdings and then a few other recent topperformers.

    Wells Fargo Company, [NYSE], has been laboring to go higher during
    the past three years. Where indices are at their highest levels in
    recent years, WFC is not performing very well, and it is at resistance.

    WFC M 10 Mar 13

    The daily gives a clearer picture. The last two bars are overlapping at
    a resistance point. If price cannot get above the 36.50 area on strong volume and upside activity, this may be the best WFC can do. One
    would want to be defensive, if long.

    WFC D 10 Mar 13

    DaVita Healthcare Partners, [NYSE], is a trending market with higher
    swing highs and higher swing lows. Last week's performance raises a
    red flag with a new high, increased volume, but a lower close. At new highs, sellers were stronger than buyers, and the net swing high gain
    is not much since last November's swing high.

    The high volume weeks reflect strong buyers, but one needs to be just a little wary, here.

    DVA W 10 Mar 13

    A look at the daily shows why the weekly chart raises a red flag. The high, 3 trading days ago, was an Outside Key Reversal, [OKR], a new
    high, a lower low, relative to the previous day, and a low-end close.
    The developing market activity is telling us sellers overwhelmed
    buyers and took control.

    This factual observation is confirmed next day when price gaps down
    on sharply higher volume. Friday's small range is the market's way of
    letting us know that the response from buyers was weak. With indices
    doing much better, this could be a stand aside for longs, purely based
    on observing market behavior.

    DVA D 10 Mar 13

    IBM, [NYSE[, an old stand-by, and it is showing its age. While indices
    have rallied well over the past year, IBM can only move sideways. Can
    it go higher? Yes. Will it? That is a more pertinent question. Point "B"
    failed big time when it retested swing high "A." Right now, "C" is
    retesting the upper resistance level. How is it faring on the daily?

    IBM W 10 Mar 13

    The smaller daily ranges are the market's way of showing that demand
    is weak, otherwise, the ranges would be larger. Sellers have not
    stepped in, but they could be waiting for the rally to go just a touch
    higher. How price reacts to the 212 area will be an important tell for
    IBM's future. If it continues higher, fine. If not, the market is sending
    a message.

    IBM D 10 Mar 13

    Ubiquitous GOOGLE, [Nas], is a market in an obvious up trend showing no signs of any weakness. This is a market leading the NAS index.

    GOOG W 10 Mar 13

    Smaller ranges are not necessarily bad, as long as they maintain
    upward momentum, and what corrections there are, are relatively
    small, like the end of February and last week. When you compare
    GOOG with the first three stocks, you can see how well a strong price
    move leaves little guesswork about being long, or not.

    GOOG D 10 Mar 13

    LinkedIn Corp, [NYSE], is another stock that is not sending mixed
    signals or raising red flags. Developing market activity is telling anyone
    watching that this market is healthy.

    LNKD W 10 Mar 13

    All one has to do is observe the corrections since the strong breakout, last month. There is very little give-back, telling us buyers are in
    control, very much in control. Also note that very little need be said
    when a stock is doing so well relative to the rest of the market.

    LNKD D 10 Mar 13

    Celgene Corp, [NAS], is probably the strongest of the group. All we are doing is looking at individual stocks as they compare to the various
    indices from which they came. Last week was an impressive one: a
    wide range and strong close.

    CELG W 10 Mar 13

    It is interesting that some of the stronger markets are NAS stocks, the weakest index, relative to the S&P, and DOW. The NAS has been
    struggling to recover the 50% retracement of its range from the 2000
    high to 2002 low.

    What this little exercise does is put an individual stock as measured
    against an index to see how it is performing. One can look, and within
    a few minutes make a determination about the overall condition of a
    stock as a candidate to be held, like the last three stocks, when
    compared to the relative performance of the first three.

    What we did not do is show any stocks that are near their lows or well under 50% of their last year's range. Those stocks do not belong in
    one's portfolio, and if anyone has any, well, that ship has sailed, not to sound callous, but the market gave signs of weakness a long time ago,
    and if one chooses to ignore them, the lessons can be expensive.

    [We can do a multi-time frame chart analysis of a stock, for a fee, if
    anyone is interested.] [mn@edgetraderplus.com]

    A mistake many make, when assessing a poorer performing stock is to
    see how the market is rallying, overall, and then "hoping" that stock
    will "catch up." Markets do not work that way. This is an easier way
    to make a factual assessment based on what the market has to say
    about a stock you may own. It takes away the emotional element of
    being tied to a decision made that may not be doing all that well.

    One thing about the market, it never lies.

    CELG D 10 Mar 13

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