2 Stocks In Potentially Bullish Setups


Kate Stalter Image Kate Stalter CMO & Senior Financial Advisor, Better Money Decisions

Stocks outpacing the broader market in a downturn are often the ones best positioned for new rallies when market conditions improve. MoneyShow’s Kate Stalter zeroes in on two smaller companies showing robust chart action.

As you’d imagine, the heavy-volume selling has narrowed the number of watch-list candidates among equities.

While plenty of market pundits are crowing that now is a time to shop for bargains, I view this environment as too risky for new longs—other than, perhaps, inverse ETFs that I am using as trading vehicles, not medium-term holds.

Although the ranks of technically sound equities has thinned, that doesn’t mean it’s time to quit scouting for potential ideas. Too often, investors remain bearish well beyond the time when markets have resumed their uptrends, and they are not prepared with a watch list of technical leaders.

In early 2010, I overheard a conversation on a plane that illustrates the perils of ignoring market trend shifts. Two passengers sounded almost smug about having gotten out of the market in 2008—most likely, with significant losses—and not having re-entered.

They missed out on the big gains between March 2009 and May 2010! Shifts in trends can yield big opportunities—both on the long and short sides—and should not be ignored.

That’s why I am always attentive to stocks holding up well technically, even when the broader market is under selling pressure. Will all of these watch-list names become winners? Absolutely not. As I noted above, a market-wide downdraft can sweep even so-called “good” stocks lower in its week.

So far in this market downturn, Israel-based chip designer Mellanox (MLNX) has held up better than the majority of stocks.

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