Breadth has turned slightly negative and momentum has slowed a little, but the pockets of strong trading continues. This is a very good trading market, but it does present some dilemmas if you are trying to maximize gains, but want to keep accounts as close to highs as possible. While I remain quite bullish, I am trying to strategize a bit to deal with whatever might hide in the waning days of the year.
While seasonality favors the bulls, there typically is at least one significant day of selling before the end of the year, as positioning for the new year begins. There is a general belief that people will avoid locking in big gains for tax reasons. That is not true in many cases. Taxpayers that use mark-to-market or use tax-advantaged trading vehicles don't care about taxes. Also, many people like the idea of starting the new year with a clean slate.
We have had a great run lately, and I am going to continue to push for more, but I'm also focusing more on my primary goal, which is to keep accounts as close to highs as possible. That is especially important with the end of the year upon us, I'd like to finish the year with accounts at all-time highs.
To accomplish that goal while staying bullish, I find the best approach is to take partial profits and shorten the time frame on some trades. I'll continue to look for new buys, but I'm going to be more aggressive with my stops and cutting back into strength. There are plenty of stocks I like into 2021, but I'm not too worried about finding some good entry points in the next several weeks.
One name on my radar Tuesday is a thinly traded biotechnology stock Forte Biosciences (FBRX) . The average volume is less than 100,000 shares per day, but we caught a great run in this back in July when it moved from around $15 to over $50. It found support around $35 and is starting to turn back up again. In September, Chardan analyst Gbola Amusa set a target on the stock at $110 up from $60 and stated that microbiome medicines and products like that offered by FBRX for atopic dermatitis could be in the "next big theme in biotech." That stock trades very thinly and can easily fall $4-$5 or more on ordinary volatility, but I like it into data sometime in 2021.