Selling Into Strength

The market is overbought and it’s time to protect our winnings from the past week or so, they are extensive.  I peeled back some exposure on the long side from names that had run too far too fast (a great problem to have).  They include $TIE $OVTI $FNSR $SWKS and $PWER.  I will be looking to add back to these positions in a few days after the market and the individual names work off their overbought readings and give better secondary entry points.

I’m letting positions in $CMI $WPRT and $DLB run, they are all showing good strength today and aren’t yet overbought.  They can withstand a broader market consolidation and move higher in my opinion.  Cummins reported great earnings last night, I will be adding to the position again most likely in a few days.

Isilon Systems $ISLN doesn’t want to stop after being up more than 25% last week.  As I said previously, this is what we call a runaway gap, it almost always leads to higher prices and a longer term up trend.  It’s hard to be buying more of this name here as it is extremely extended, but I will be bellying up to the table in a day or two after the market peels back a little.

Don’t be afraid to average up on your winners here in a few days.  If this market really is getting healthier, this is just the beginning of a longer trend.  Find your secondary entry points and execute.  Don’t chase stocks here.

If you’re looking for some hedges for your longs, look in the steel space.  Nucor $NUE, that flag looks pitiful and I believe it eventually breaks to the downside unless we are at some kind of an overall market bottom a la March 09′.

I will also be looking to add a few new names on the long side once this consolidation/pullback is completed.  Look for entries to $CREE $RDWR $STRI $MELI $ARUN $AMT $SBAC $CTSH $RVBD and a few others.  Obviously I won’t be taking all, but 3 or 4 is likely.

If you’re into the slower low beta names, $MCD $ABV $SJM and a bunch of others look great here.  They are a little too low beta for me, but if I was a little more risk adverse I would be in these names for sure.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see the Disclaimer page for a full disclaimer.


blog comments powered by Disqus