How Much Heat Can You Take?
From FAANG and cannabis stocks to crude oil and crypto, the party seems to be over in the most popular trends, at least for the time being.
It's amazing to see how the sentiment can turn on a dime for even the most popular stocks. The most recent being Apple (AAPL). How short memories can be for even the most bullish Apple investor...
With Apple stock down 25% from it's highs, one would think this is the first time investor's have had to deal with such a setback. However, the chart above shows the kind of "heat" that long term investor's sometimes have to endure in order to maximize gains.
It was only a few years ago that Apple corrected 33% and before that it receded 45% from it's highs. Right now the stock is close to a 30% correction and I suspect many "investors" are throwing in the towel.
From my experience many market participants often confuse investments and trades. They do this by by taking profits too quickly on their "investment" and then refuse to take a small loss on their "trade" and end up holding that stock for an extended period of time before selling at a loss.
This confusion can be prevented by creating a written plan before you enter any position. This plan should distinguish what type of position you're taking (trade or investment) and then position sizing accordingly. If you need to brush up on position size you can review it here.
Stocks finished lower on the week but buyers stepped up Thursday and Friday limiting the damage and keeping prices firmly above their October lows.
All the major sectors finished in the red along with AAPL and FB which continue to experience selling pressure.
As the market continues to test the bull's and bear's resolve, there are still stocks trading at or near all time highs. Many of the same stocks experiencing relative strength over the last few weeks continue to trend higher.
Below are five of the stronger trending stocks on my CM50 (Canadian MegaTrends) & UM50 (US MegaTrends) lists.
Remember that chasing stocks higher is not recommended and even the strongest trending stocks can experience significant drawdowns.