Saturday, March 28, 2015

Lg-Cap Portfolio Review (3/28/15)

We should be calling 2015 "the year of the roller-coaster" because that's exactly what it's felt like. Every time the market has moved higher traders have begun to feel very comfortable and confident in their stock allocations. Yet each grind higher has been followed by that inevitable crest, that once tops out creates a vision of uncertainty and rush of emotional terror.

Last week markets rallied strongly and were just about to make new highs (Russell Small Caps did make new highs). This week the SP500 gave back 2.2% and almost all of last week's move. So here we are again, back to support and wondering if we will get a shot back up or if there is another wave lower to this unsettling ride.

SP500 (Oct 2014-present) Daily chart
The SP500 since October has been one sharp directional move after another. This has caused many traders to overtrade and become more emotional than they have in a few years. Where most go wrong I feel is that they place too much emphasis on what the major markets are doing and let that impact their trading. Instead of letting the best stocks lead, they try to synchronize each swing in the market with their individual stock signals. What that creates is a lot of second guessing and ill timed decisions.

When it comes to managing a portfolio of individual stocks we need to let those stocks shine through. If you want to trade the Averages then just buy the SPY, but if you want to own the best stocks in the best setups you have to let Relative Strength work.

If the market is pulling back and a particular stock is breaking through highs, that should tell you everything you need to know. We focus on strength.


While not much real damage was done due to last week's buffer, our Lg-Cap Portfolio did have one casualty. We are exiting UNP after it failed to hold its weekly closing support and triggered our stop.

-Exiting Union Pacific Railroad (UNP)
We have had our doubts about this holding for the last couple weeks as it really struggled to muster any kind of strength. In the face of broad market weakness this week, UNP caved in and signaled a more cautious posture going forward.

While I have little doubt that UNP is and will continue to be a long-term winner, the support failure this week says the intermediate trend will need more time to find itself.

Our goal is to keep losses small and to target the strongest and best opportunities in the market. By exiting UNP here we are limiting losses and raising some cash should higher probability setups present themselves.

Not a single one of our positions finished higher this week, a few outperformed, but all ended up lower. There are a couple in particular that we need to watch as they are approaching support.

CSCO
Cisco has given a nice hard shake since its strong breakout 6-weeks ago. But the trend remains intact based on our timeframe, and despite the 10% correction off the highs it is still holding above its large breakout area. As long as the lows hold at $26.35 we will also.

WFC
What appeared to be a quality continuation last week was completely reversed this week. Price has moved sharply back into the trading range and the RS line rolled back below the downtrend resistance.

While this is not a positive development, the uptrend remains in play as the swing low at 51.64 has not been violated. One more week like this though and we will likely step aside.

TWX
Similarly TWX shot back into its prior trading range after a nice breakout last week. But like WFC, the uptrend is in no doubt based on the higher highs and higher lows. This is the primary factor that determines our positioning.

Our stops are still out of the way, but it will take several more weeks of price stability to move them higher. The next logical trailing level will be around $82.

PPG
PPG has come back to test its support area, but managed to bounce right off of it and keep the trend valid. We will be watching this over the next few weeks to see if this was just a kiss and go for more upside or more of a significant trend failure. For now our stops at $219 are in a good location.

PCG
I continue to remain stubbornly optimistic about PCG. I like this base breakout and I still believe the correction is counter trend. The momentum indicator suggests this market is still in an uptrend as it is trading above the zero line. I also indicates however that the stock could fall further in the intermediate term before it finds a lasting bottom.

At this point my best guess is that it will retest the breakout. That is where I have placed my stop for the entire trade. PCG is still fishing for a higher low.

IP
IP likes to rip and consolidate, rip and consolidate. We have now seen a retest of the breakout from 7-weeks ago and the stock has seemingly found some interested buyers in this area. 3 weeks in a row price has poked through the 20 WMA near 55-54 and has bounced back each time.

I am still in the camp that IP works its way higher over time, but it sure likes to make us wait for it.

HON
Honeywell keeps working its way from the lower left to the upper right. It hasn't exactly been a smooth ride, but the trend is clear. Since 2015 the stock has found consistent buyers at the 20 WMA and that continued this week.

This one is still working fine that there is nothing to worry about. Our stop remains just below our entry point, so we essentially have a risk free trade in one of the best companies in the world. I'll take that all day.

LMT
Lockheed is in one solid trend. The February breakout continues to be defended by buyers in the $198 area. Our stops remain out of the way below the recent swing low at 188.35.

AAPL
Apple has been consolidating its recent surge on lighter volume and in an orderly manner. The two areas I'm watching here are the 118 breakout as a potential trailing stop, and the confirmed swing low at 106.

There has been a lot of angst surrounding AAPL in both the financial media and on Twitter. Traders are worried about giving back profits and are selling prematurely. In my opinion they are picking up nickels in front of a steam roller.

The trend is clearly higher and intact. There is nothing to do but pray it pulls back to build a new support base so we can add to our current positions.

BMY
Higher highs and higher lows for BMY. Looking strong and a leader for the best sector in the market.

BA
Boeing continues to consolidate its surge on lighter volume and we are just waiting for a higher swing low to be set so we can trail stops. Until it pulls back further we will just have to give it plenty of room to find support.

DIS
Disney is a beast and is nowhere near danger. We need this to come in some so we can have a new support low to trail stops. Currently its in runaway mode.

SBUX
See Disney above.

UNH
I can't wait for UNH to put in a meaningful consolidation. I would like to increase my position size but simply have no strong support areas to do so against.

FB
After setting a new high early in the week, Facebook eventually turned lower with the rest of the market. Despite the overall weakness this finished almost unchanged for the week. All in all I would say thats a fine result.

We don't need to know where the market will go in the future to have success. All we need to do is focus on the trends of top performing stocks and own those stocks as they continue to set new highs and higher swing lows.

The less complicated you can make your investing process the easier and more profitable your journey will be. Good Luck Trading!

-ZenTrends










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