Fifth percent retracement. Nice bounce. Sell or buy?
Depends.
It depends whether a stock went up much more than 50% from the bottom.
Depends whether a stock should never have been that low to begin with.
I am reading a lot about how the Fed is buoying this market with lots of free money and that's why stocks are up.
Instead I look at it as if the Fed took the worst scenario off the table by intimating that it will be there for the banks.
That left the banks no longer as vulnerable to all of the worries that came when the credit line revolvers were taken down.
That, more than anything else, took off the worst case scenario that occurred two weeks ago. Two deals to me define the moment that moved us up: First, Carnival (CCL) where the coupon may have been large but the stock itself rallied 50%. Found money was hard to come by.
Not any more.
The second was the Slack (WORK) deal when it was upsized. That meant tech could get a lifeline. Next thing you know, Airbnb can get money. A place thought to be totally at risk because of Covid-19 gets its money.
Next thing you know Nordstrom (JWN) gets some 8.75% money, $600 million worth, and that viability is off the table. Yes, I wrote viability because when the stock was at $12 that reflected a closed credit market. That turned out to be a screaming buy because it wasn't Neiman Marcus, an in-doubt private company.
If the credit markets are open then you can take off a lot of the downside and conclude that the prices we hit two weeks ago were too low. Royal (RCL) and Norwegian (NCLH) can get money of Carnival does. Kohl's (KSS) can get money if it needs it if Nordstrom did.
The most intriguing? The oils,. They don't have the demand to justify the bounce. But they didn't have the lack of demand to go as low as they did.
What you are looking for right now are stocks that haven't moved that can get the credit they need. But you don't want to be in the stocks that have come all the way back.
The ones that are still say 25% off the bottom but can get credit?
That's where you might want to hunt.
