Here is the DWA alert.
Market / Intel Update
On March 22nd the Percent of Stocks whose RS Charts are in X's reversed down for the OTC market (RSXOTC) and on the same day the Percent of Stocks Whose RS Charts are in X's (RSXNYSE) reversed up for the NYSE market. On the same day the Percent of OTC Stocks Above Their Bullish Support Lines (PTOTC) reversed down into a column of O's and just two weeks later the PTNYSE reversed up into X's. This suggested a major shift in strength in the market from OTC stocks to NYSE stocks. The picture today remains the same - the strength remains in the NYSE stocks, not the OTC stocks. When this changes, we too will change but for now focus new positions on the NYSE area of the market. Remember that the RSXNYSE had been negative since May 1998 so these changes can last for some time.
As OTC stocks violated their support lines, it caused us to take defensive action and that has been the right thing to do. No one has a crystal ball and can tell how bad any decline will be but what we do know is that when the odds are stacked against you defensive action is the appropriate action to take. That has not changed. If stocks you still own violate major support areas, examine that stock closely and determine what defensive action is most appropriate for the client. That could be anything from not initiating new positions, to selling partial positions, to selling all of the position, to buying protective puts, to writing calls against the position. This is what your clients pay you to do - bring value added to the table.
Let's look at an example of a stock changing trend, Intel (INTC). A tried and true favorite over the years but the evidence points to a shift from demand in control of INTC to supply in control. The Percent of Semiconductor Stocks on Relative Strength Buy Signals (RSPSEMI) has reversed down into a column of O's for the first time since December 1998! On Wednesday, INTC hit 114 and that broke a double bottom and followed a lower top. As well, the move to 114 violated the bullish support line dating back to December 1999. Furthermore a move to 108 would violate all near term support on the chart. If you clients own INTC, now is a time to call them up and evaluate the situation. Just because you may believe it to be a great company, doesn't mean the stock can't fall in price. You don't have to look far to see great technology companies that have fallen substantially in price. Remember, your clients pay out to manage the risk in their portfolios. I can guarantee you no ot!
her brokers out there are talking about the RSPSEMI and trend line violations on INTC. This is what sets you apart from the rest of the crowd. |
