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Is It Time to Quit if Your Chart Picks Crushed the Market Last Week?

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This Friday’s screens had 24 buys and 72 sells. That compares with the previous Friday’s 15 buys and 9 sells.

I concluded last week that the small number of signals, particularly buy signals suggested that the rally was exhausted, despite the buys having the edge. I chose not to add any charts to the list, long or short, but held on to all of the shorts that had been on the list.

That looks to have been the correct judgement.  The list had 8 open picks, ending the week with an average gain of 5.8% on an average holding period of 22 calendar days, i.e. 3 weeks and a day. That’s the second best weekly performance of the last month and one of the best since I began this exercise a couple of years ago. It was up from +3.1% and 15 days the previous week.  This is cash basis, no leverage.

By contrast the S&P 500 lost 1.7% over the past 22 days and nearly 2% last week.  Maybe we should follow the old adage, quit while you’re a head, because you never know what might be a foot. Especially when it comes to the TA and the market. Sometimes the TA beats the market, and sometimes the market kicks your ass.

Which is why your trading strategy needs to include a mechanism to minimize losses, or what traders euphemistically call “drawdowns.” Mine is to avoid stops initially, but to minimize risk by spreading it across multiple picks, with the expectation that one or two will run big –  enough to offset the Biggest Loser. It’s not glamorous, but it works.

I then use trend support and resistance based picks to close out picks as they mature.

This week, 1465 stocks met the initial screening criteria. 6.6% of them rendered signals on Friday, which above the average 3 to 5%. 4.9% of the stocks that met the minimum criteria had sell signals. That is also a significant number, but indicates neither thrust, norm maximum momentum. So staying mostly short looks like the way to go this week, but as existing picks have aged a bit it’s time to tighten some of those stops and protect profits.

After reviewing the charts from the screen, I’m adding 5 of them to the list this week, all on the short side. That will bring the list to a full complement of 13 picks, only one of which is long.

I have updated the stops on some of the picks and added a stop to the one long pick. The rest of the stops remain in place. As usual, I’ll roll the dice on the new picks, give them a chance to breathe, and let them ride for at least this week.

The table and charts of open and new picks are below (subscriber version only).

Table (subscriber version only)

Charts (subscriber version only)

Technical Trader subscribers click here to download the complete report.

The strategy and tactics opinions expressed in this report illustrate one particular approach to trading. No representation is made that it is the best approach, or even suitable for any particular investor.

These picks are illustrative and theoretical. Nothing in this report is meant as individual investment advice and you should not construe it as such. Trade at your own risk. 

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