Take Profit On These Spotlight Stocks; Why Is This Base Flawed?

Several of IBD’s 16 Stock Spotlight names ended the week below buy points or in buy ranges above valid bases. About half the stocks on the list were more than 20% above breakouts, which means investors should be looking carefully to determine whether they want to lock in a portion of profits earned during the run.

X The only Spotlight name below a buy point was China’s Alibaba Group Holding (BABA), which had pulled back to 4% below a 191.85 buy point. The stock’s relative strength line, which compares a stock’s performance to the S&P 500, has been seriously lagging since early December. This suggests any breakout from the current base could face challenges.

Among stocks more than 20% above their buy points, Winnebago (WGO) is the only name sending any significant warning flags. It posted two of the widest point spreads of its run, losses in very heavy trade, on Dec. 20 and Jan. 6. This can suggest the stock is turning more volatile — although Winnebago shares tend to be mature and well-behaved.

It then dropped below its 10-week moving average in mild trade. That’s not a sell signal in and of itself, but if the 10-week line begins to act as a line of resistance, locking in a larger portion of profit is a smart move.

Discount retailer Five Below (FIVE) logged a broad, heavy-volume loss Jan. 8. But the pullback stopped well short of a test of the stock’s 10-week moving average, and shares have since been consolidating nicely.

Stocks tend to consolidate after advances of 20% to 25%. Some of those consolidations will become bases, others will extend into deeper corrections. Locking in a portion of profit is part of a disciplined strategy to book consistent gains.

The Spotlight group’s wildest gains have come from Gardner Denver (GDI), which is up 47% from a September breakout, NMI Holdings (NMIH), up 54% since October, and William Lyon Homes (WLH), up 28%from a November breakout.

Other Leading Stock-Related News:

This New IPO Is Test-Driving The Future Of Ford, GM, Boeing

Amazon Raises Its Monthly Fee On Prime Membership Program

Nasdasq Up: Could This Tech Beat Apple In 2018? When To Buy Back Bitcoin


Source link

Originally posted 2018-01-19 20:24:50.


No comments.

Leave a Reply

error: Content is protected !!