MARKET UPDATE #80

Free weekly stock market education service with 3 stock ideas.

Disclaimer: The content is for educational purpose only. No investment advice. Please read the full disclaimer.

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Hi ,

the stock market is always changing. In some periods growth and momentum stocks are leading the market, in other periods value is leading. You job as a stock trader is to adjust to that situation. That does not mean that you have to buy value stocks now. Instead you must give the growth names the time to consolidate and build new bases.

I strongly recommend to focus on one style and do not switch between styles. It's better to be specialized in one trading style instead of master multiple styles with mediocre results. For me the style is growth and momentum.

Here is what you will find in this newsletter:

Questions and answers from the subscribers forum
Comment on the current market situation: Rotation between growth and value
Stocks I am watching at the moment: $APPS, $BAND, $DVA
Trading tips: How I screen for stocks with MarketSmith: Find growth and momentum stocks

If you have questions, please use the subscribers forum.

Thank you and good trading,
Julian

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QUESTION AND ANSWERS

3 new questions:
1) Selling 50% undercutting the breakout point / selling into strength
2) Profit taking
3) Hedging

Do you have a question for me? Use the free forum. Links are below!

Visit the forum

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MARKET CONDITIONS

Rotation between growth and value

Growth and momentum stocks were the favorite since begin of the rally. Now it seems that the market in changing into the lagging value and cyclical names. You can see that in the decreasing relative strength line for growth stocks and in the increasing relative strength line for value stocks.

I recognized that something changed in the last two weeks as I started to sell extended stocks. In the last week I bought back into many leading growth names on pullbacks and sold them close to their highs. Many of them showed signs of exhaustion and weakness. I always call it weakness when a stock is trying to break out and fell back below it's breakout line. These action is also called "failed breakout". We saw many growth names with failed breakouts in the last week. A clear sign for me to get more defensive.

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Russell 1000 Growth: The rally continues but the index started to underperform against the S&P 500. That's a sign that growth is not in favor at the moment.

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Russell 1000 Value: It took over the leadership. The relative strength line is increasing and the prices are going up. However, this can change anytime. So be prepared and watch your growth names.

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3 LEADING STOCKS

I didn't changed so many names on my watchlist. A lot of them started to consolidate or correct.

This week I have 47 stocks on my watchlist, 2 less as last week.

$APPS - I added this stock to my watchlist because of the strong price and volume action. I personally want to see a consolidation here before I consider to buy it.

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$BAND – It's only one of a few communication software stocks which are consolidating nicely. Maybe this industry of the software sector is setting up again.

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$DVA: This stock caught my attention last week. It consolidated very nicely in a large cup and handle. The relative strength line is down which makes the stock a clear laggard. But the strong volume and pattern is very constructive.

Such stocks are not the super performance stocks which go up 100% in a few weeks. But they can deliver a solid performance while other growth names are consolidating. By the way: $DVA had nice increases in EPS growth in the last quarters.

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TRADING TIPS

How I screen for stocks with MarketSmith: Find growth and momentum stocks

I produced a second video how I screen for stocks. In this episode I show you how I screen for stocks with Market Smith. You can pause the video to see all settings and create you own screeners.

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