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Dow Jones Paces Broad Drop As These 2 Growth Stocks Post Sell Signals

Concern over an intensifying conflict between the U.S. and China over the gaping trade deficit remained front and center in the stock market on Friday, sending the Dow Jones industrial average down more than 2%.

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At 23,950, the Dow Jones industrial average still remains above the key 200-day moving average but is also down more than 2% year to date.

At 2 p.m. ET, the Nasdaq composite and the S&P 500 saw their losses to expand around 1.9% to 2%. The S&P SmallCap 600 sank 1.7%.

Volume is running lower on both exchanges vs. the same time Thursday.

Micron Technology (MU) nearly gave back all of its stout gains from a 47.08 entry in a double-bottom base. Shares dropped to as low as 47.26 before rebounding.

When a leading stock breaks out and rises at least 10% past the proper buy point, a good sell rule is to exit the position if the stock threatens to do a complete round trip of those large short-term gains. Such negative action indicates the general market is either highly choppy or in correction mode.

On March 19, IBD downgraded the current outlook (as seen in IBD’s Big Picture) to “Uptrend under pressure” from “Market in confirmed uptrend” after the S&P 500 logged as many as six distribution days. A distribution occurs when the major indexes fall 0.2% or more in higher turnover vs. the prior day. IBD uses NYSE composite volume to study the price-and-volume action of the S&P 500.

Six trading sessions later on March 29, IBD noted via The Big Picture column that the current outlook got downgraded again, this time to “Market in correction.” During this phase, it’s smart strategy to raise cash, lock in gains, cut losses, and sit on the sidelines. Wait for calmer market conditions to return.

Going back to Micron, watch to see how the stock behaves near the key 50-day moving average.

The memory-chip expert’s advance from the proper buy point at one time exceeded 30%. When the gains from a proper breakout hit the 20%-25% level or more, that’s a ripe time to lock in at least partial gains.

Smart Global (SGH) dipped more than 4% and briefly violated a 43.25 buy point in a cuplike pattern that began Nov. 24. Such steep losses illustrate the importance of having an exit plan for your stocks that doesn’t wipe out all gains.

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