I see the identical pattern in 4 charts, so I am cutting back exposure to all 4. These have the makings of companies that could be beginning to break down. If I am wrong, I'll pay up a slight premium, to regain exposure once the technical pattern improves. The names are different but it's the same pattern - 4 companies which are breaking down below their 50 day moving averages - unless they quickly reverse back over and above, this could portend a more serious move downward in these issues. I see a lot of other companies who could be approaching a similar set up with another day or two of bad behavior - i.e. we could have a lot of charts rolling over; so despite the tepid bounce back in the indexes (which we said in the weekly roundup would not be surprising as nothing goes straight down), I am seeing some things I do not like in individual charts.
- Mosaic (MOS) reduced to 1.2% exposure (from 2.2%)
- CF Industries (CF) reduced to 0.6% exposure (from 1.2%)
- Gafisa (GFA) reduced to 0.8% exposure (from 2.0%)
- Ctrip.com (CTRP) reduce to 0.7% exposure (from 1.3%)
The first 3 names closed below this key level today; whereas the latter has been below for about a week, but since it bounced a bit today I am using that as an opportunity to cut since I missed doing so on the initial breakdown.
These moves take another 3.3% away from long exposure and into cash. Although a bounce was expected in the indexes as (a) the market lost 3.5% last week which is huge for an index and (b) the S&P 500 is now at a key long term support level, the 50 day moving average of 1377 - I continue to be cautious in the mid term, although hazarding a guess of the day to day action is a fool's game. But I'm going to let the individual charts tell me the story; these 4 have turned (perhaps temporarily) for the worse, and quite a few others I see with potential to follow suit. I'll show the charts below
Long all names mentioned in fund; long Mosaic in personal account
Do....
we....
look....
familiar?....
2 comments:
Funny, I purchased a decent amount of MOS yesterday right before I read this and was kicking myself when I got home last night. Then it rockets up today. I suppose with the everyone and their mom in the Potashes this type of volatility is to be expected but we're down and up almost 5% on back-to-back days without a catalyst in sight. I've been trying to trade around a core position in MOS and POT and I guess I got lucky with the timing yesterday but I think I'm going to give up and try to hold for 6 months or so. I agree with your core premise of a $200 target price for MOS but with such volatilty I'm afraid to try and guess the right entry and exit points -- the chart doesn't seem to be necessarily helpful . . .
-Rusten
Hi Rusten
Things are always tricky around a key moving average like this. You have to be prepared to change course - as I wrote in the post ; i.e. if they reversed quickly, so would I.
The S&P 500 was a great example - last Monday it broke through the 200 day moving average mid day - that would be a "key signal" to bring in more buys. Then within hours it reversed, sold off, and we have lost 3.5% by the end of the week. Mother market is ironic like that.
You see that in a lot of individual charts; technical analysis is not science, more art. They are looking solid today but not enough to make me change my decision.
A lot of times the same happens on the way up... a stock is below a key resistance area - than snuggles up to that line - so you might sell, expecting a sell off. Then it surprises you and blasts though - well you just buy back as the condition improved. You lose on transactions costs and you pay maybe 2-3% higher but that is the "insurance" cost you pay for what would normally be a selloff that happens at that point.
Or you can just tuck under pillow and come back in a year, I do believe $200 is still very viable. But that doesnt mean it cannot go to $105 first ;) (MOS)
Main thing is to be flexible. And charts don't always work. Nothing does :) But finding things that work 70% puts the odds in your favor.
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