Many stocks especially in the growth sector have had very big selloffs and corrections in recent weeks. Some of the hardest hit were the following stocks: Coupons.com (COUP), Rocket Fuel (FUEL), FireEye (FEYE), Pandora (P), RetailMeNot (SALE) and ZuLily (ZU).
I am now waiting to see if the sell off spreads to more stocks and starts to weigh down the general market averages. I have no way of knowing this for sure, but one possible scenario is that big financial institutions step in and start buying. That in turn may create new sector leaders and perhaps ignited a new rally. The recent rally was on light volume, so I am very cautious with any trade.
Kulicke & Soffa (KLIC), Lam Research (LRCX), Micron Technology (MU) and SanDisk (SNDK) are all related to semiconductor manufacturing and these stocks have held strong while many tech stocks have been falling hard.
Pandora is a stock I am very interested in. So many in the media are talking Pandora down, while sales keep coming and listeners keep growing. In the company’s latest quarterly results, sales for Pandora were $194 million vs. $115 million in the previous year. I don’t have a crystal ball, but I expect some institutional buyers to snap up Pandora shares soon.
In the solar space, I am interested in Canadian Solar (CSIQ), SunPower (SPWR), First Solar (FSLR), SunEdison (SUNE), and SolarCity (SCTY).
In the auto sector I am looking at General Motors (GM) and Tata Motors (TTM).
As for Chinese ADRs, I am studying Weibo (WB), Leju Holdings (LEJU), 58.com (WUBA), Ctrip.com (CTRP) and BitAuto Holdings (BITA).
Right now, it looks as if the selloff is not done and my strategy is to look for reversals as well as breakouts on high volume.
As I write this U.S. Treasury Bonds are on an uptrend signaling to me a weaker economy and potentially some more trouble for U.S. stocks. As always I am ready for any trend to reverse. However, until bonds turn down I am becoming more bearish on stocks.
I am expecting a downtrend to spread and some sort of capitulation to happen. Volume is my key to see where and when institutions get really excited about a stock.
Some nice strong volume up days in the averages are needed. And with the Federal Reserve tapering as well as the summer trading season arriving, I may be testing and waiting for some time.
DISCLAIMER: The investments discussed are held in client accounts as of April 30, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
