So What's the Game Plan?
By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Report
From Cabot Top Ten Report Movers & Shakers 11/6/09
After the market and many leaders took a beating last week, stocks showed some resilience this week. Really, it’s not that surprising—big moves in the market take time to reverse, so it’s unlikely the uptrend will just up and die in an instant. Plus, while damage was definitely done last week, the broad market remains in relatively good shape.
So what’s the game plan? As much as we like to take a decisive stand, we think playing the middle ground is the proper course of action. Hold some cash and cut loose your weaker stocks (especially on low-volume rallies; we’ve seen a ton of them this week), but also hang on to your best performers and do a little buying of strong stocks that have fallen to support.
From this point, you should let the market tell its own story—there’s no need to anticipate and stress out about what’s coming. If the market continues higher from here, with the major indexes rising back above their 50-day lines and many leaders pushing higher, you can get more aggressive. If the sellers start to flex their muscle again, you can raise more cash.
As for individual stocks, we’re really not seeing many great set-ups—lots of high-volume declines followed by low-volume bounces. They could work, but it’s not a great, high-odds play.
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