Movers & Shakers

The volatility that sprang up on the market after Thanksgiving continued this week, and most of it was on the downside—most major indexes (especially small- and mid-cap indexes, along with the energy-heavy NYSE Composite) broke below their 50-day lines on Wednesday and some have sliced through their mid-November lows.

That’s a red flag, and it’s reason enough to trim your sails. Making sure you have a good-sized cash position is vital, and on the buy side, it pays to be even more selective—our Market Monitor will likely move down another notch or two in Monday’s issue, although it will remain in neutral territory.

But not everything this week was dour—many individual stocks have taken this week’s selling in stride. There was some damage (we have a few sell recommendations below), but given the market’s retreat, relatively few Top Ten stocks (and almost no liquid leaders) broke their intermediate-term uptrends.  

Of course, that’s more descriptive than predictive; there’s nothing that says these leaders can’t crack later today or next week. But just going with the evidence in front of us, individual stocks still look decent, something we haven’t been able to say during past market dips this year.

As we’ve written a few times lately, we think your best course of action depends on (a) how much cash you have and (b) how the stocks you own are performing. If you’re heavily invested and own some duds, by all means, sell your losers and laggards (and even take a couple of partial profits) and raise some cash.  

But if you haven’t been too aggressive on the buy side (i.e., you already have a good-sized cash position), and your stocks are holding up well, you can be a bit more patient, possibly setting some tight mental stops and going from there.

Either way, the main message is that the evidence has deteriorated, so taking some defensive measures makes sense.

Most of all, it’s necessary to have a plan in case this month’s weakness continues—i.e., be sure to have a sell plan for even your best performers. At the end of this report, we have an expanded and updated list of stops to help you out.

This is an excerpt from Cabot Top Ten Trader, which features the best trades to make every week.  Designed for experienced investors who want even more great growth stock ideas, this advisory recommends the best 10 stocks each month for short-term investment by aggressive growth investors.

Michael Cintolo is Cabot's Vice President of Investments and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. To read customer reviews of Cabot Top Ten Trader, click here. To read reviews of Cabot Growth Investor, click here.

Michael Cintolo can be found on Google Plus.

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Shopify (SHOP), which came public in May of last year, is a new leader.


Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

For AMZN to be undervalued, the stock would need to fall to 393. 50.

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