These are not wholesale selloffs - but simply trimming 10-25% off of some long positions. Technically, many have bounced back so they are now below their 50 day moving average. If the market makes a sweeping move upward, then these sells will be poor decisions as the stocks will continue to ramp up, but as I look across the market I see a lot of stocks in very similar situations - having bounced from panic oversold lows (on very damaged charts), they have now trended back up to the 50 day moving average. This is a key technical level, and for moves to continue these stocks need to close above this level. I'll use Foster Wheeler (FWLT) as an example, but literally I could replace Foster Wheeler with about 150 stocks out of 200 on my watch list. They all are in the same condition. If this is indeed the bottom, and the next bull market begins, well you simply have to pay up at a higher price for the same stock once the technical condition improves. I am not betting that way myself, so I am raising cash to buy back these same names at (hopefully) lower prices on the next round of correction.
A few other stocks I trimmed are simply not performing or acting well at all, especially in the technology group - Apple (AAPL) is a great example. Another stock on my watch list, Intuitive Surgical (ISRG) is another. You'd expect people to come back to these names if the market were truly healthy. I could be wrong, and with a few more days of kool aid, maybe investors will flee back to these names and good times will be here again. But their lack of bounce makes me worried. So I'd rather take some smaller loss here in some of these names, rather than be selling into the next downturn (again, I am assuming there will be a next downturn). This does not change my affinity for any of these names fundamentally, but the vast majority of stocks in my portfolio or watch list (for future potential addition) are in poor technical condition. Outside of fertilizer and coal I don't see a whole bevy of stocks above their 50 day moving averages...
I've trimmed
- Mastercard (MA)
- Apple (AAPL)
- Research in Motion (RIMM)
- Foster Wheeler (FWLT)
- Shaw Group (SGR)
- Huron Consulting (HURN)
- First Solar (FSLR)
- Peabody Energy (BTU) <-- this is actually a healthy chart relatively speaking
- Massey Energy (MEE) <--- same as BTU
- Mechel (MTL)
- Diamond Offshore (DO)
- Suntech Power (STP)
- Mosaic (MOS)
Again, aside from the 2 coal stocks, Mechel (which is a coal/steel/iron play), and Mosaic every chart above is not a good chart. While I pick stocks on fundamentals and long term trends, I don't want to ignore facts on the technical side staring me in the face - and the blunt truth is most stocks have a lot of technical damage in them - the type of things that do not get fixed in a week. I much prefer to buy stocks pulling back in strong uptrends, and that type of stock just is extremely rare. So I am taking the opposite tack of a bull market - instead of buying on pullbacks, I am selling on strength. I could be a day or two early, but we are now (just that quickly) at an inflection point. These stocks need to start breaking through overhead resistance (50 day moving average) to make the next leg up. Judging from what is "working" in this environment (worst of breed) it doesn't appear this will happen, but as always, I can (and will at times) be wrong. For now, caution and raising cash.
Long all names mentioned aside from Intuitive Surgical in fund; long Mosaic, Foster Wheeler, Suntech Power in personal account
