• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

The Trend Is Your Friend but Be Ready to React to Changes in Market Character

Focus on price action but increase vigilance. Be ready to react if fundamental issues start to hit the market in a more systematic way.
By JAMES "REV SHARK" DEPORRE
Aug 06, 2020 | 07:10 AM EDT
Stocks quotes in this article: FSLY, ROKU

The indices continued to rise on Wednesday as over 700 stocks hit new 12-month highs and very strong breadth. It was typical bull market action that crushed the bears that keep trying to call a market turn but there are some issues that require increased vigilance and preparation for the faster reactions.

The first problem right now is that entry points are becoming increasingly difficult. That is always the case when the Nasdaq has run up six days in a row on strong breadth. The number of stocks that are extended is increasing. In addition, speculative traders have been extremely aggressive. When they do latch on to a fast-moving, low priced stock they move them so quickly that there is little choice but to engage in extreme chasing if you want in. My list of stocks moving over 10% during the day is quite long but I'm growing nervous about chasing some of the moves at this juncture.

The second problem I see is that the reaction to earnings reports last night was generally poor. It is typical 'sell the news' responses after a big run. Two examples are Fastly (FSLY) and Roku (ROKU) . Both have been leaders, both had good reports, and both are substantially lower this morning. There are always a few stocks that have these sorts of responses but the number last night was greater than usual and hit some of the recent leaders.

It is quite easy to use these two issues in combination with bear's arguments about the economy, valuations, and the Covid-19 crisis to craft a thesis of potential disaster but, as we know, that approach to the market has been a loser. We need to stay focused on price action but increase our vigilance and be ready to react faster and more decisively if these fundamental issues start to hit the market in a more systematic way.

For me, the key to navigating this market is the action I see in my individual stocks. If I start losing money, that is a signal to start cutting positions more aggressively. My goal is to keep my accounts as close to highs as possible. I want to protect gains and that means playing very stout defense when stocks show some signs of weakness.

While I am growing a little worried about price action, it is likely that Congress will agree on a stimulus deal that will keep a bid under the market. I suspect that the bears are looking for a 'sell the reaction' to a deal announcement but the process of agreement is very likely to drag out for a while.

There is nothing wrong with this market that can't be fixed with some rest and consolidation. It is important to not be too bearish as that process takes place but tighten up the trade management a bit and be ready for some increased volatility.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, James "Rev Shark" DePorre had no position in the securities mentioned.

TAGS: Earnings | Economy | Investing | Markets | Politics | Stocks | Trading | Coronavirus

More from Investing

Does Halozyme Therapeutics, My Q2 Pick, Still Have a HALO Over It?

Bruce Kamich
Jul 1, 2022 1:13 PM EDT

Let's check the charts on this biotechnology stock and see if it still has a prayer.

Shares of Xencor Could Be Bought on a 50% Correction

Bruce Kamich
Jul 1, 2022 11:59 AM EDT

Traders should remain patient.

Let's Size Up the Market's Prospects for the Second Half of 2022

Bret Jensen
Jul 1, 2022 11:30 AM EDT

The next six months can't be worse than the first six, can they?

In an Ugly First Half for Stocks, Value Was a Lot Less Ugly Than Growth

Jonathan Heller
Jul 1, 2022 11:00 AM EDT

A look at the Russell indexes shows that value stocks suffered in the first six months of 2022 but not nearly as much as growth issues.

Nuvalent Has Begun the Bottoming Process

Bruce Kamich
Jul 1, 2022 10:52 AM EDT

Let's check the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:59 PM EDT PAUL PRICE

    Very good quarterly numbers from Bassett Furniture (BSET)

    Bassett Furniture (BSET) blew right through analys...
  • 04:41 PM EDT PAUL PRICE

    First Half Results - Putrid Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 marked...
  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login