Green Stocks on Red Days

Monday. Enough said.

Trading Account Update
No changes in trading positions. BANR was actually green all day today as was WRI. WFM is still holding up well. This morning's selling was a bit more nasty than usual for 2012, but buyers came back in and bought stocks for the second half of the day.

There was plenty of grumbling today about a possible China slow down as well as the Fed coming out via their favorite channel, WSJ's John Hilsenrath, and hinted maybe they are holding off on more stimulus. Not a very friendly mix at all. For now it pays to view market action rather than try and over think what may come of these two important new stories. Keep in mind that money managers have been putting cash into stocks (as noted by The Reformed Broker) and that is unlikely to go full reverse without clear data a slowdown is at hand.

Green Stocks on Red Days

Over the past couple of weeks there have actually been some down days with plenty of red showing in stocks. Down days need not be hated or feared though, sometimes they actually can help you see a new direction.

First off, some disclaimers. This post pertains to a generally up trending market or one that is set in a range sideways. Down trend markets get a few more layers of complication and I am leaving that out for now. Green stocks on red days is not usually a one day event that you can pin a whole trading plan around, but more of a weight of evidence sort of thing. With that said, here we go.

On down days I know I tend to focus most on any names I am long. That's natural and makes sense. Second up for most will be the big "tell" stocks or commodities like AAPL, SLV, or maybe copper and oil. Again, this makes sense and is intuitive.

But on down days, or even better, a string of them the market may hint or whisper where the action may turn up next.

You can skip over any ETF short like a PSQ or a TZA. Funny thing but on a down day I will read how the short funds are "working". Really? I kind of hope so. Also any stock that has had positive earnings news or positive news headlines will merit a question mark as that could be a one day pop sort of thing and may not apply to a general market move. Also keep in mind "safe" plays like bonds, utilities, tobacco, or staples will act more like a weigh station for money and not a new push into those sectors for a longer move.

On "dip" days money will want to get in to names they have missed or names they want to rotate into. I like to think of runs in the market as waves of the ocean, as the power of fund flows pours out on the beach, another wave is right behind riding in the next move:

The easiest way to mine for this is some kind of screening tool. iBC's ChessNwine shows how the PPT tools allow for easy screening of stocks gaining ground (I am a subscriber).

It pays to make sure on down days you are keeping track of green stocks. If buyers want in even on pull backs it is a clear statement of the desire and direction of money flow. Taken over days should that happen, it is one of the more powerful signals I know of rotation and can point you in a new profitable direction.

For the ultra nerdy you may try to plot buy volume with price over time in something called a Gantt Chart. Used in the professional world this type of layout tracks changes and progress over time. There is no reason why one cannot apply this chart to show sector rotation and stock run lifetime in a cycle over time:

I actually used to make these but have been a touch too busy to keep them up. I need to get back to it.

Have a good night.

Position Review and Thoughts on Rotation

Never fond of Monday's but today was not actually half bad. Tonight I can access and use Twitter on my mobile phone but I cannot use any of the buttons or post tweets on my desktop computer. No one seems to have much of an idea about this. If you can help, email me or use the comments section.

Position Review and Thoughts on Rotation
I have been long a few stocks for a while now. After a few down days and some positive market movement today, it's a great time to review all 5 and see where things stand.

AREX
Opened a position on 1/31/12. The setup was a long intact uptrend and a move over the $34 range which was anew breakout area. Today's chart:

AREX had a crazy day on 2/8 and hit as high as $38. Since then it has tailed off and now is retesting the "scene of the crime", the breakout level just above $34.50. A successful touch and hold of the 20 MDA is supportive of this name going forward. That said, the stock has stalled out here.

WTS
Opened a position on 1/31/12. The set up here was a clear move out of a very tight basing channel. The accumulation volume had been excellent as well. $38.50 was key zone to clear. Today's chart:

After touching $40 this name has cooled off a bit. Volume has dried up on the downward move and buyers returned today. This one is still set up nicely for a move higher.

BANR
Opened a position 2/1/2012. To be fair this should have been stashed in my long term account. I have every indication that BANR will cross up and over $20 and run, just maybe not soon! May have been a little early here. Today's chart:

This one actually did close over $20 on 2/3 but since has fallen off. On the positive side the small gap from 1/25-1/26 has been closed and buyers returned today.

BCR
I worked on this one with a friend a while back but I missed the fireworks around 1/20-1/23. After that I was playing resolution of the bull flag as (opened position on 2/8/2012) seen in today's chart:

This one caught a price target upgrade the other day and thus a price and volume spike up. Right now it is facing serious price resistance at about $96. Above that and it's a "$100 Dolla Roll".

KFN
Opened a position on 2/8/2012. I had worked on this chart (and about 10 others) the night before and I just liked the action so I bought a spot. Today's chart:

The buyer accumulation has been outstanding for this name. The price has cleared the breakout level of $9. A bit of a pause here right now.

So all in all the 5 are not bad open positions nor in any real trouble. So what's the problem?

How many times did I use the words "pause", "resistance", "cooling off" in the selections above?

Even on market down days many names have been running well. Granted I tend to stay away from the hottest sectors (biotech, solars, chinese egg rolls) but many other things have been moving. The 5 above had real momentum coming into where I bought them, yet have slowed down.

So it could be benign reloading and the age old "resting, wants higher" sort of thing. Hopefully that is what it will turn out to be.

On the other hand there is another side to rotation of money, especially at the upper ranges of longer rallies. That means when things are moving they gather interest and steam, but as soon an it stops (resistance, news, etc) money moves along.

I think most understand rotation as it relates to sectors. Money leaves bonds say and goes to riskier assets. Buyers may walk away from the utility sector and instead chase semiconductors higher. That's well established.

What I am seeing some signs of (not absolutely, not definite) is buyer rotation from a binary choice: moving vs. non- moving.

There are some good examples in the names above and some others on screening names I have saved. Be aware and keep an eye on your positions. If they have been moving and see a pause, it's important they continue to keep moving. If they are supported by strong technicals and the momentum has been there, a walk away from buyers may mean you are holding a "non-moving" name and money will be rotating out. I may have a few in the above names myself.

Have a good night.