The market action today of focusing too much on the indices can hurt your trading of individual stocks. I see headlines on CNBC about how the Nasdaq is up six days in a row and there are many suggestions that the market is overbought, hitting resistance levels and is on the brink of a correction.
Maybe, but I see plenty of great action in individual stocks. I mentioned a number of them in my prior post and I'm seeing a number of others that I may buy later this afternoon. Bloom Energy (BE) is one example. The stock has been holding around $11 and looks like it's trying to push over its 50 day moving average. It could use some volume but I like that chart.
If I was focused on the indices, rather than the individual stock, I would probably have a much more cautious view. I don't like the look of the indices very much at this point but they aren't having much impact on the stocks I'm watching.
The main reason we watch the indices, other than actually trading them, is that stocks tend to move in correlated fashion quite often. That is especially so when computerized buy and sell programs go to work and move a large basket of stocks at the same time.
Trying to find good stock picks in a market that is trending down is very difficult and the odds are not in our favor. But in a market like this, with the indices acting indecisively, it is better to ignore them and not allow your emotions to be driven by the big picture. There is money to be made in individual stocks. Don't let the indices get in the way.