Locking in Gains

 | Sep 13, 2013 | 11:22 AM EDT
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It is another mixed day of action as the market continues to consolidate recent gains. The bears are growling that the market is finally seeing the error of its ways and will soon be correcting much deeper, but that is more hope than anything else. While there are plenty of negative catalysts, the market doesn't seem interested in acting on them. The technical action is exactly what you'd like to see after a big run: It is churning and consolidating big moves while flippers lock in gains.

I'm traveling this afternoon so I'm not doing a lot. I took partial profits in NQ Mobile (NQ), which I've mentioned before, and flipped some GSV Capital (GSVC) on the Twitter IPO news. I believe both will continue to work higher but I like to lock in some of the big gap-up gains and then look for re-entry. If I have to pay up, I will forget my sale points and pay up.

I have added to Zhone Technologies (ZHNE), a low-priced China play with a cup-and-handle formation developing. It is a speculative play that can get hot very fast when it takes out a key technical level.

Good luck the rest of the day, and have a great weekend. Don't forget to read my weekend column about the one thing I believe is the key to successful trading. I'll see you bright and early on Monday.

Sept. 13, 2013 | 8:25 AM EDT

  • Don't Dwell on the Dark Side

Stay focused on individual stocks.

Great things are done by a series of small things brought together. --Vincent Van Gogh

Despite the excitement over the Twitter IPO, we have another mixed start this morning. The market has looked tired after a big run and is taking a rest as it encounters technical resistance around the highs of early August.

The big question is whether it rests and then makes a run at new highs or does it top out and roll over. The bears will tell us that a budget battle is coming, the Fed will likely start the tapering process, and Larry Summers may be the next Fed head amid a weak economic recovery. 

As always, it is easy to come up with a laundry list of negatives, but if you have been making money in this market, you know that it simply hasn't paid to dwell on the dark side. It has been much more profitable to focus on what can go right rather than what can go wrong.

One of the biggest positives in the market recently is the very strong action in many individual stocks. If you have focused on the best-acting stocks, you would have had no idea that we had a correction in August. We have had strong momentum and when that occurs, it tends to create strong underlying support.

There are times in the market where we dance to the headlines and bounce around on macro concerns. The market-timers love that sort of action as it makes their pondering about the state of the world sound much more significant.

The present market is not one of those times where the big picture is driving things. What is driving it is good stock picking. Many individual stocks are acting extremely well, and if you are in the right ones, you won't care what is going on in the indices.

In my early days of trading, I was often deaf and blind to the big picture and the indices. It made for some ugly surprises at times when there were major news events, but it helped keep me in good trades that I might have exited had I been overly worried about macro developments.

The market has changed in the last few years and has often undermined good stock-picking, but there are periods in which the focus on individual stocks rewards us far more than a focus on the big picture. Now is one of those times.

The overall market may need more rest but that makes it an ideal time to look for stocks that are going to excel in the next move. Don't be fooled by market-timers who are missing great opportunities under the surface.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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