Another market pullback over, another vicious V-shaped reversal in place, returning us to all time highs.
This one clocked in at -7.4% on a closing basis. I have no doubt the next batch of top-callers are moving from make-up to the green room as we speak. For those that tried to call it this time around, some will have learnt their lesson, but most won’t, because some people simply never learn, and that’s what makes it better in the long run for those of us with a systematic process who don’t listen to them and have learnt the hard way prediction doesn’t pay. The media may not make these clowns accountable, but the market always will.
Let’s turn to how our names performed.
It was a great week for our longs, the major exception being $CCI which triggered an exit for a 6% loss at Friday’s close, after a volatile post-earnings sell-off that saw it break below its MA’s and previous support.
Otherwise, there were no other exits or new entry signals, but the further advance in many of our names did provide an opportunity to move stops higher to their next level of support or trend invalidation.
One thing I did notice on Friday was how many of our names underperformed in that move unlike the rest of the week. What was a great day for the market by reaching all time highs wasn’t reflected in the p&l for the first time in a while. The reason for that was Friday’s move was clearly led by the Energy and Materials sectors climbing 2%, and with financials also putting in a good performance, all sectors in which we have no exposure. It will be interesting to monitor this going forward, if it was just a one-day wonder for heavily beaten-down areas of the market, or some form of longer-term rotation as former leaders rest while the market continues to move higher with fresh legs.
$DPS, our largest and oldest holding, continues to act very well, rising for five of the last eight days on increased volume. Our stop now moves to the 10/17 close, alongside the long-term trend line and just below the 50-day.
On a relative basis $BRK.B has been rather slow to recover and still remains below its September highs, but switching to the weekly you can see there’s nothing to worry about here. We’re still giving this plenty of room and should we see new highs next week it may give us a chance to trail the stop to that previous low weekly close.
$NKE followed-through to fresh all time highs, allowing our stop to move up to the 10/14 close near the 50-day.
The numbers may not be big, but $COST put in a solid performance this week, moving to a new all time high close every day this week, having risen for 10 of the last 11 sessions. The 2-year weekly chart is just as impressive.
Utilities remain one of the strongest sectors this year and $ED has continued to trend higher since taking our entry after its range breakout in early October. We’ve now moved our stop up towards that level.
$QLYS is an interesting name that many people won’t be familiar with. This entry came a few weeks ago as it made new highs while the broader market was correcting, and is typical of the kind of entry you can get during corrections. They might not be at all time highs, or 52-wk highs, but instead 50-day or 10-week highs or whatever your timeframe allows. This is how we got one of our biggest winners last year in $QIHU, during a correction.
If you use a market index as a proxy for entering a position you will always miss these, names that lead during market selloffs and then continue even stronger when the market itself resumes higher. With $QLYS, despite the fact it initially looked like a failed breakout, it never pulled back further than the 20EMA, and it’s clear the volume continues to increase on advances, most notably this week. The significance of this week’s move is even more apparent when looking at the 2-year weekly chart, blasting clear of Jan/Feb 2014 levels to all time highs.
Other names not shown include $HD, $ALXN, $CNSL, $ANAC, $CAG, $SBH.
In terms of a watchlist, there were plenty of names beforehand (contrary to what many people thought), but now with this week’s move to all time highs there are literally hundreds of them. The vast majority of the names I was already watching remain worthy contenders, some are setting up, some are alternatives to names I already own, some I feel I’ve missed but I simply don’t have room. You just can’t own them all.
Here are some I’m watching:-