The run to new highs has not surprisingly provided a new wave of stocks flashing buy signals. Whether or not they’re actionable for you will depend on your own risk profile and timeframe. Earlier this week I took entry signals in $HD after its gap higher, and an arguably belated signal in $BRK.B which continues to act very well. I have two other positions that may trigger for me Monday which will appear on the blog at a later date should they confirm.
The main frustration with selecting positions now is that there are so many great setups you just can’t take them all. That’s a nice problem to have! For my own part it’s been exacerbated by the fact I’ve slowly been moving to a more concentrated portfolio, so at the end of last week I made a one-off adjustment, a kind of rebalance if you will, where I exited some positions that haven’t necessarily invalidated their trends ($DOW, $FDX, $F, $BAX) but I considered them sub-optimal compared to existing positions that remain strong, as well as the new signals emerging now. I also exited $NOC which remains perfectly valid, but I already have $LMT, obviously a very similar company, which I prefer in terms of of its technical position and trend strength.
I’ve got 15-20 names on a watchlist, some of which I’ll go through now, which is as many stocks as I currently already own, so anything that comes from that list as a new position will need to be exceptional. This is where you can be more demanding of the trend in order to take new signals. A good example would be $ACT:-
Strictly speaking that’s already a new closing high in place right there, even if it is only by a nickel. It’s a marginal break and a good example of what I mean when I say you don’t need to take sub-optimal signals when there are so many stocks breaking out to new highs. Believe me, $ACT was a good name last year that gave a great trade and I have some bias that would want me to get back in to this, but I have plenty of others that look better so it needs to be an unequivocal signal when it’s got competition to make it to the portfolio. It’s not necessarily that we want it to ‘confirm’, it’s just that we can afford to be more demanding. Can it follow through, can it then follow through again, when it consolidates will it give back a whole day or will it be a tight one suggesting it will move higher again soon? Is it going to drive you crazy to sit there waiting to find out? Are you prepared to watch it for a week in order to get the signal you really want, and then would you still take it? It’s really hard to do, but it’s a great discipline, and when there are so many valid signals it can be necessary to be a little late in order to be sure.
Here are some other attractive setups:-
$GBX – I love this trend, and arguably could have taken it earlier this week, you still could now, but for where and how I place my stop the risk is a little less favorable than other positions I have. If your timeframe is shorter than mine or if you place your stops tighter then it may still be good for you.
$INTC is another one. Beautiful trend which made a fresh high Thursday for a new signal. That swing low near the 50-day looks like a good level for a stop too, although there’s also a gap there so it might need a little more room.
The breakout potential for $NKE is arguably the market’s worst kept secret, this has been so long in the making. As a result this could have a lot of option plays in place around the prospect of it happening so I wouldn’t be surprised to see some volatility when it gets close and more backing and filling or a false move before it finally confirms either way. This is an example of where if your timeframe is long enough you can afford to just let it play out before you make your move, be more demanding, maybe use a weekly close instead of a daily one.
$GOOGL is another company I love where as long as it’s in an uptrend that meets my criteria I want to be involved. I consider it a tech ETF it has its fingers in so many pies and has so much insight into consumer behavior and technology trends. If it takes out $605 cleanly I could happily get on board with a stop down in that $571 area.