Tuesday, May 06, 2014

So Much For The Rally Attempt

Around 11 am, the Capitalist Bull Twitter feed alerted traders to tighten stops to protect profits and prevent losses on recent positions because the market and leading growth stocks appeared to be stalling, and stall they did. Going into the close, all three major indices were down significantly in heavy volume.

Leading growth stocks suspiciously performed in line with the market yesterday. In the afternoon, they began stalling near moving averages and couldn't follow through in any meaningful volume despite the rally into the close. That action continued this morning forcing a reevaluation of the technicals, which quickly became more negative with every small rally attempt as leading growth failed to follow, eventually rolling over towards recent lows and tighter stops in heavier volume.

Few stocks survived today's selling. Trader's that hesitated to lock in small profits and cut losses, paid the price by the close. At this point, most positions should have been stopped out. While it would be nice to go fishing, the damage is not severe enough to require a very long time to correct. Most stocks just continue to work on the bottoms of their consolidations and could attempt a move up the right side over the next week or two. Tesla Motors (TSLA), Jazz Pharmaceuticals (JAZZ), Valeant Pharmaceuticals (VRX), Solar City (SCTY), and Horizon Pharma (HZNP) all report over the next few days. Market reactions to their reports will give traders further insight into the market's health.

Every stock has a bad day or two, but when they all begin to under-perform together, especially when the rally attempt is tentative, alarm bells have to ring quickly, especially for aggressive traders that do not wait for an official follow through day. 


Jabil Circuit (JBL) failed to participate in the recent rally attempts and has continued to stall and consolidate into it fifty day moving average. A breakdown below the recent support can be shorted.

Krispy Kreme Donuts (KKD) continues to work on a bearish head and shoulder pattern. The stock has rallied in low volume or stalled at the fifty day moving average for since the beginning of the year. A breakdown off the fifty day moving average can be shorted. Earnings are expected around May 29th.

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