Monday, August 25, 2014

Traders Remain Frustrated Despite Record All Time Market Highs

Leading growth stocks as a group continue to lag the general market even though growth stocks are outperforming value stocks. Everyday a new growth stock or two breaks out in well above average volume, and this would normally be good news, unfortunately, literally, only a handful of all strong breakouts have made any progress passed their first day. This would be a positive if the markets were moving sideways or pulling back, showing relative strength, but the markets have been making new fifty two week and all time highs, while moving higher almost everyday for the last three weeks.

Autohome (ATHM) broke out of a cup shaped base and Emerge Energy Services (EMES) finally cleared a flat base in well above average volume. JD.com (JD), Priceline Group (PCLN), Facebook (FB), and Bidu (BIDU), continue to try and break free of their respective breakout areas. Bitauto (BITA), Gilead Sciences (GILD), and Salix Pharmaceuticals (SLXP), are historically over extended and due for a consolidation. Intermune (ITMN), a regular on the leading growth stocks analysis, has doubled in price since its May 19th breakout from a cup and handle base, being bought out for $74/share by Roche (RHHBY).

The number of proper short setups has diminished but not disappeared. Many need some time to setup in lower risk areas to breakdown. Almost no recent setup has been able to follow through for longer then a day. Better to wait for some distribution to hit the market before venturing into these waters.

Traders remain frustrated. Even with a decent gain on a leading growth stock or two, it is not enough to offset the small losses that have been taken to protect from larger losses on positions that haven't made progress and are falling back below breakout levels. Traders should remain very tight with protecting profits and minimizing losses. If the past few short rallies were any indication, profits will vanish very, very quickly when distribution hits the market. Is it vacation time yet?
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