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Caution & Quicker Profit-Taking

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Stock markets never just move nice and easy upward and onward without a few or more down days.

Stock trading isn’t easy – otherwise everyone would just quit working and let the markets make their living for them.

Instead, I do a ton of analysis each and every day. I get prepped for down days or down weeks. And I provide my words of caution to you as necessary.

Know that my work isn’t just about individual stocks – but also for the markets and market indexes. I know that markets can drive individual stocks up or down, so working on the indexes is critical.

Caution With Reason

Right now, I am taking a cautious approach to the markets.

Monday morning’s bloodbath was a public reminder that stocks don’t just go up… And uncertainty could be lurking below the surface.

Worldwide COVID cases are again on the rise, even in increasingly vaccinated regions like Europe and certainly in the US.

COVID-19 Cases Worldwide — Source: Bloomberg

But while the reasons for selling may be different, the results are not a shock to me.

In my July 9 update, My Edge Saves You from Market Mayhem, I warned readers about the divergence I was seeing in stocks. 

Despite the indexes making new highs, many stocks were not participating in the rally.

Those numbers have continued to deteriorate.

Nasdaq Composite Index & Percent of Nasdaq Stocks Above 50-Day MA — Source: TradingView

As you know if you’ve been following my work for a while now, the 50-day moving average (MA) defines the short-term trend.

And as of yesterday, just 32% of Nasdaq stocks were trading above their 50-day moving averages.

So, 68% of stocks are short-term bearish.

The divergence is clear in the chart above.

Even though prices are slightly above the February levels, individual stocks are falling behind.

I am seeing the same action around the 200-day moving average:

Nasdaq Composite Index & Percent of Nasdaq Stocks Above 200-Day MA — Source: TradingView

With the Nasdaq Composite index firmly above the 200-day average (what I use to define the long-term trend), roughly 40% of stocks are below it.

This makes me cautious.

I’m not saying we are at the cusp of a nasty bear market. This could end up being a short-term drop, pricing in another wave of the virus. 

But this is not an easy environment.

I like to keep things simple.

I like to trade when the odds are in my favor – when setups are plentiful and most of them are working.

I like to trade when all signs point in the same direction.

And right now, that is not the case.

There is still money to be made. But it’s going to take a little more work. 

You’ll want to be quick to nail down profits sooner.

Quick Profits

Deswell Industries (DSWL) was a watchlist stock I traded last month.

Daily Chart of Deswell Industries (DSWL) — Source: TradingView

It made a quick surge, and I booked a nice gain in about two weeks.

But, like many others, the move was short-lived.

I made about $10 a share on Albemarle (ALB) last Monday, but I was hoping for a lot more.

The breakout ran out of steam, and shares fell back to my entry price a few days later.

The three stocks I added this week were all down on Monday. 

But that’s okay. We don’t own them yet.

That’s why we wait for confirmation to get in. nThat’s also one of the great benefits of this approach.

If stocks aren’t breaking out, I’m not buying them. I am happy to sit in cash until they do.

Another Word for Quick Gains

As I have been discussing in Stock Surge Daily, I am ramping up my insider stock buying research that is part of my Stock Surge Indicator (SSI)

Last week, I did a live coaching event that was all about insider buying and how it works to find stocks that are set to rally higher and stronger. 

I have developed a new product that we’ve recently launched here at Traders Agency called Insider Edge

It’s all about one of my common-sense tools that finds stocks with big surges in the works that are tipped off by insiders’ buying their own shares.

To get the full rundown on how to profit by buying stocks that insiders are buying right now and learn more about Insider Edge at Traders Agency, click here right now.

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2 Comments

  1. verandah
    July 22, 2021 @ 5:58 am

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    Reply

    • Traders Agency Analyst
      July 22, 2021 @ 4:22 pm

      Our pleasure! Thanks so much for taking the time to leave us a comment. We look forward to delivering our students continued insightful content!

      Reply

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