Stocks That Aren’t Broken Yet

The last few weeks have been nothing short of a complete market collapse. I will leave it up to others to recap it. But I’ll say this, if you’re a trend/momentum trader, you should have been out of the majority of your long exposure at SPY 130, and ALL of your long exposure at SPY 127. This is not a looking back in hindsight thing, this is a basic risk management thing for this type of strategy, any way you slice it you completely failed to do your job if those weren’t your levels, give or take a few cents.

So what now? I had no less than 8 friends and family members call or e-mail me yesterday asking what to do. I don’t run their money anymore under Surfview Capital, I don’t run anyone’s money anymore as I am far too busy getting ready to launch Estimize. I do keep a close eye on the markets in order to be in the flow of things, and I still keep a watchlist of stocks, I still do research.

My advice is this. If you’re a trend/momentum trader and you did your job by stepping to the sidelines a few weeks ago, there is no reason to be getting involved here. One of the great parts about our strategy is that we are not beholden to getting into stocks at good prices. Remember the mantra, buy high, sell higher. You don’t need to catch VMW down here to make your year, it’s not going to matter in the long run. This is not our market, so don’t play in it. There may come a time soon when the market┬ástabilizes, puts in a base, and sets up for a great opportunity to buy some great stocks at 20-30% off their highs. Until then, lay off and keep your powder dry.

That doesn’t mean you shouldn’t be keeping a list of targets. I always keep a list of targets. Below are my favorites, stocks that still are not broken technically on a long term basis (everything is broken technically short term right now). These stocks represent, based on their relative strength and fundamental strength, the names which should outperform if the market puts in a bottom between here and SPX 1040.


These are the first stocks I would focus on. There are other more technically broken names that I would have an eye on as well, they include.


Here’s the scary part. We’ve had a huge run in the markets, and many stocks were looking toppy before the crash. If you look at your weekly charts, this crash should be a warning, in even the best names, that there is likely much more downside from here. I have studied technical patterns for a long time, and these are the types of moves that you look back on and say, I should have just gone to treasuries for a few years until the dust settles.

There are always stocks making new highs in almost every market, the question is, are the odds in your favor of holding those stocks. No one can pick em all perfectly. This has and always will be an odds game for us momentum/trend guys. For us it’s not about being smarter than the market, it’s about using what the market is giving us to position ourselves accordingly, using the best odds based on what we know about how markets behave, and then managing risk.

Right now the odds are not in the favor of heavy long exposure on the intermediate term time frame, but there are still a bunch of great companies I’d love to buy if and when that changes.

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