Stock Selection Is Very Key Right Now

By All About Trends

Friday We Said:

“After a big day yesterday, the indexes are doing just what one wants to see today — consolidating yesterday's gains at the highs in a tight range. This is normal and very constructive for further gains. Leading stocks are acting well too with most of them adding to yesterday's gains and some quietly consolidating yesterday's gains.”

And the key words for next week are CONSOLIDATION and PULLBACK. It should come as no surprise that we are short term overbought (red circles) and in need of some consolidation after last weeks' ” It Pays To Be Prepared In Advance” move. Remember consolidations can take place in two forms. Sideways (the bulk of August) or in the form of a pullback.

So what are we going to do about all of that? Be mindful of the indexes, but focus upon individual stocks as it's a Market Of Stocks not just a stock market. Buy the dips and sell the rips. Keep in mind that we'll see some names trade to the beat of their own drum and others that will trade to the beat of the indexes. We'll keep doing what we've always done and pick ‘em off one at a time.

Upon going through the charts we noticed a lot of names that are newer issues. This is always where the NEW LEADERSHIP emerges. New leadership is surely not going to be a has been like PCLN or CMG. Remember we want leadership material not a leader from the last upleg. Last uplegs leaders tend to become next uplegs laggards. We have a lot of names out there with structure all on the long side and a fair amount of names that have the ability to lead from here on out.

We have made quite a short term spike and many of our names are getting short term extended which means locking in gains becomes a priority so we can redeploy money to names that are now waking up.

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