Hold'em or Fold'em?

03/25/2013 10:20 am EST


Thomas Aspray

, Professional Trader & Analyst

In volatile markets like this one, investors have to decide whether to hang on or sell and wait for the next opportunity. MoneyShow's Tom Aspray reviews the key levels for a number of his recent recommendations to give you the most up-to-date guidance.

A last-minute bailout deal will keep Cyprus in the EU by restructuring their banks, which does not require any parliamentary vote. This has removed the uncertainty that exacerbated last week’s choppy market action.

Overseas markets have responded very positively, with the Nikkei-225 up 1.7% and the Eurozone bourses also acting well. The two strongest market averages, the Dow Industrials and Russell 2000, show typical continuation patterns. A strong close Monday will resolve these patterns to the upside, projecting further new highs, and the S&P 500 could finally make new all-time highs.

Such a rally will be an opportunity to take partial profits on some of our strongest stocks, as well as to get out of those stocks that have started to lag the overall market. Any stocks that are underperforming the overall market are likely to be more vulnerable when the market finally corrects.

The technical analysis of stocks in both categories will illustrate what to look for when you are managing your positions.

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Chart Analysis: Unum (UNM) is a $5.85 billion accident and health insurance company that was recommended on December 19. At the end of December, it bottomed at $20.40 and hit both of the recommended buy levels.

  • The low just barely violated the minor 38.2% Fibonacci retracement support and the 20-day EMA.

  • The strong chart resistance (line a) was decisively overcome in early January.

  • The relative performance broke its downtrend (line b) in October. By early December, the RS line was in a new uptrend.

  • The price breakout was confirmed by the on-balance volume (OBV) moving through resistance (line d). The OBV has accelerated to the upside in 2013, and along with the RS line confirmed the recent highs.

  • A close back above $27.75 should signal a move toward long-term resistance at the 2008 high of $29.86.

  • UNM is currently testing its weekly and monthly Starc+ bands.

General Mills (GIS) was recommended on December 17, three weeks after it overcame yearlong resistance.

  • The recommend buy levels were hit in late December (point 2), as trend line support (line f) was tested, coming close to the quarterly pivot.

  • GIS gapped to the upside to start off 2013, and in February the upper boundary of the trading channel (line e) was overcome.

  • The relative performance moved through its downtrend (line g) in late October. The RS line did confirm the most recent high.

  • The OBV started leading prices in November, moving through three-month resistance (line h).

  • The OBV still shows a strong uptrend (line i), and it made further new highs last week.

  • GIS looks ready to close above its monthly Starc+ band for the second month in a row.

NEXT: Updates for 2 More Recommendations


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Tumi Holdings (TUMI) and Target Corporation (TGT) were two retail stocks I recommended on February 6. Looking at TUMI, it had completed a long-term flag formation and was retesting the breakout level.

  • TUMI dropped below the lower buy level at $22.12 several times in February before it surged to a high of $24.76 in early February. TUMI reversed to the downside the next day (point 1), which I took as a sign of weakness.

  • The relative performance was above its prior peak, but below the January high.

  • The RS line support (line b) was broken last week. The OBV acted better in early March, as it was above its WMA.

  • Nevertheless, after the reversal I recommended selling half of the position at $24.05, with a stop at $22.79, which was above the average entry price at $22.48.

  • This stop was hit last Thursday, March 21, on heavy volume.

I recommended buying US Bancorp (USB) at $31.94 in a tweet on December 18. It subsequently hit a low later in the month of $31.50.

  • USB gradually moved higher over the next three months, and made a high on March 5 at $34.76.

  • The relative performance was making lower lows in early March (line e), and then dropped below support (line f) early last week, as it was acting weaker than prices.

  • A week after the highs, the OBV dropped below its WMA, and then rebounded to its WMA (point 3), which as I have previously discussed is a negative formation.

  • After making its high, USB made little upside progress over the next 11 days.

  • When it gapped lower on March 21, I tweeted to sell half at $33.72, and that was hit last Friday.

  • Currently, the stop is at $33.14, which is not far above Friday’s low of $33.44.

What it Means. As all experienced traders and investors know, not every recommendation is going to work out. Therefore, learning to manage both your winners and disappointments is an important part of investing profitably.

The decline on March 15 hit quite a few of my stops. While some are now higher, others are lower. Currently, the futures are higher early Monday, and another rally phase will be an opportunity to take additional profits, as well as close out the weaker positions.

How to Profit: No recommendation for now. Be sure to follow me on Twitter where I update during the day.

Portfolio Update: For Unum (UNM), investors should be long from $20.99. We recently sold a third of the remaining position at $26.92. Set your stop at $25.11. Sell another third at $29.44.

For General Mills (GIS), investors are long from $40.38. We sold half at $46.22. Use a stop now at $45.31.

For Tumi Holdings (TUMI), investors went 50% long at $22.44 and 50% at $22.12. We sold half at $24.05, and stopped out of the other half at $22.79.

For US Bancorp (USB), investors are long at $31.94. We sold half at $33.72. Set your stop now at $33.14.

Also, I will be giving a free webinar Wednesday discussing several of my technical methods. Sign up here if you are interested.

NEXT: The Full Charts in Play Portfolio


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