This has been an interesting week and I think it will be even more interesting when it ends.
Someone sent me an email question about the MSB stock pick.
I highlighted this stock earlier this month two or three times as a potential breakout stock pick.
And on Friday the stock broke it’s $260 resistance point to rally over 4% in a day.
And on Monday it went up even more.
Check out the chart.
The person that emailed asked this:
“Nice call on MSB. I picked up a block at25.50 when you mentioned. Really like the yield and with gains the last 2 days like it even more”
“Any thoughts here at 28.25? Keeping as core holding etc??”
I can’t act as a personal investment advisor, but in my general view right now with breakouts and buying new stocks is that it’s best to have a short-term outlook.
The overall pattern in this stock is indeed positive, but I’d be more excited about buying it as a long-term play if we are in a low risk investment time in the stock market.
And we simply aren’t.
The best time to buy and invest is AFTER the stock market has pulled back.
We haven’t had more than a 10% pullback in two years now in the S&P 500 and we’ve seen the market rally back up the past several weeks on very poor internals.
I know the Nasdaq made a new high this month and everyone on TV is excited about the big cap tech stock earnings this week, but as I said to Jim Goddard this is actually a danger sign when only a few stocks are exciting people.
So until we see a pullback in the stock market I think breakouts and new buys should be treated very cautiously with stop loss orders put on them or a short-term trading strategy being used with them. I did a video course with a breakout buying system that incorporates a rising stop selling order strategy with 60-minute charts that you can find with this link.
Now don’t get me wrong I have long positions that I’m just holding. But I’m also shorting stocks as hedges and even shorted a few more this week.
I know most people don’t want to do short-term trades and like to just buy and hold. Really I prefer to do that more myself too.
The thing though is that the worst time to make new investment buys is when the market has rallied for several weeksalready and the best time is after a pullback has happened. And if this is a stage three top like I think it is then this is actually a time to raise cash reserves to get ready to buy later.
Yes the MSB breakout pattern worked. In the right situation, it’d be easy to believe that the stock could go up for the rest of the year. But with the market in a high-risk moment that is more of a gamble than anything now.
The good thing is that MSB shows that consolidation patterns do lead to nice quick gains. MSB proves once again that when buying stocks it’s best to use good patterns instead of chasing fad stocks that have already gone up a lot. The problem is the stock market is not in a good buying pattern now and that could ruin what otherwise would have been a good long-term pattern in an individual stock.
The big question to ask is simple – is it time to get more cautious on the markets and take money off of the table if you are fully invested?
I believe the answer is yes even though most disagree – and who wants to be told to sell anything?
But if you are on margin I believe it is an absolute imperative.
If you want to use the number one stock trading pattern that I have ever used then grab my book The Two Fold Formula.
