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Taking Long Position a Little Less Risky

If looking for long positions, have protective stops. 
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In spite of being oversold last week, the markets have found little support yet. The first chart below shows the relentless slide that, in my opinion, has greatly altered the longer-term outlook, for the worse. But the oversold condition, which was seen in the shorter-term numbers has now extended to the intermediate-term numbers. This can be seen in the second chart below: the 21-day moving average of the Arms Index. That means that a rally, when it kicks in, is likely to carry further than we had been anticipating last Thursday. I had been saying a long position, if taken, would be extremely risky because it would be bucking the trend. That is still true, but perhaps a little less risky and with a little better potential advance because of the more extreme oversold conditions. Traders with the fortitude could be looking for some long positions, but always with protective stops. Longer-term investors should be looking at any decent rally as a selling opportunity.

(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called MetaStock. To learn more about this method, read my series of columns, Trading With Equivolume.)

UGI Corp.  (UGI): Buy

With the market down so far and so fast, and with the numbers suggesting a rally, I am looking for stocks that have started to hold in spite of the weakness in order to take advantage of a rally. This stock, UGI, seems to fill the requirements. Volume has been good on rallies and the width of the consolidation could support a substantial advance. Moving average convergence divergence (MACD) is going positive. A buy at this point should be protected with a stop just below the low of two weeks ago.

CABLEVISION (CVC): Cover Shorts and Buy

Cablevision was a short sale suggestion on September 23. Now, after a big drop it has started to find support and looks as though it could run back up quite easily in a market rally. The big up day followed by the similar down day last week may be indicating underlying buy interest. Therefore I am suggesting pulling out the profit on the short position and even moving to the long side, but with, as usual, a protective stop in case the slide resumes.