I would like to focus on some of the most important market factors. First, I note that the ISEE Sentiment Index rose from 30.4% to 38.7% bulls. That is correct, investors became more bullish during the market volatility in the last week. This is not the type of sentiment that leads to a low. This is what causes markets to continue dropping. Markets will fall until the large majority turn bearish. Both the S&P 500 and the NASDAQ 100 have given hook sell signals on a monthly basis. This occurs when a market rises to a new high but closes below the close of the prior time period. This is what oil did in 2008, leading to a bear market. This is a strong and a negative signal.
According to the research of Benjamin King, about 70% of the movement in any stock is attributable to the overall market while 20% derives from the company’s sector or group. Only 10% of price movement is generated by the individual stock. At present, the overall market is in control. Given a bearish market outlook, short sales are still preferred.
The Alexion Pharmaceuticals weekly cycle peaked on March 7th and bottoms on May 7th. Four of five sell signals have been profitable in the last year. The share price is likely to fall closer to $85 by late March. In fact, March has been the weakest month of any year since 1995, having been down 64% of the time for an average loss of 2.47%. The monthly cycle is also falling and does not bottom until early June.
The weekly Monster Beverage cycle turned down in mid-February and bottoms on March 18th. The stock is currently a short sale but will soon be a buy. Six of seven sell signals have been profitable in the last year. The stock will likely retreat to the $62.5-63.5 level in a weak market. In the market rout, this stock has had superior relative strength. This stock will likely be a leader as the market rebounds in mid-month. Six of seven buy signals have been successful, so close short sales and be prepared to buy on the 18th.
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