Change Of Character

Individual stocks are under pressure, there's no doubt about that. It's been a long time since we hit back to back oversold levels in stocks in such a short period. We were a little oversold last week, and that led to a short-term four-day bounce that disappeared in a couple of hours.

Without a doubt, this is a change in character, previous one-day selloffs were followed by V-shape rallies that lasted weeks. Individual stock set-ups have been non-existent for days. Seasonally, we are in a weak volatile period as you can see in the chart below. Forget about taking cookie-cutter breakouts and look for mean reversion plays.

CHART BY NAUTILUS RESEARCH.

The amount of SP500 stocks above their 3,5, and 10-day moving average is at a somewhat oversold level, but it can get a little more oversold before a dead cat bounce. The tape feels heavy, and this looks more like the beginning of a down move than the end of one.

Here is the bottom line; know your timeframe, trades are trades and investments are investments. Don't turn a swing trade into an investment just because you are down and don't turn your long term asset allocation to index ETF'S into a short-term trade because of a natural pullback.

SIGN UP HERE FOR OUR STOCK PICK OF THE WEEK.

STOCK OF THE WEEK RECAP

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

See How I Translate My Tweets & Blogs Into Actual 3rd Party Verified Trades

Work With Me

We live in a world in which we are bombarded with information, tweets, blogs, etc., content is the new salesman, content is the new marketing, content is the new networking. With information being so readily available, bloggers try to differentiate themselves with their writing skills, volume, and consistency, putting out blog posts to meet quotas. We are seeking to stand out from the crowd by showing performance, by taking all the information and seeking alpha, that’s the sole purpose of the blog. It won’t always be pretty; it’s never easy, and performance is spotty, but we seek superior risk-adjusted returns, not notoriety for our writing skills.  If this is something you can relate to, then this blog is for you.

DISCLAIMER