Weekly Update: Filter Out the Noise… Focus on the Big Picture
As I write this on Friday afternoon, the Nasdaq is down 5.6% for the week.
As expected, the recent short-term bounce was a great opportunity to take a few short trades from better entry points.
And if you took the short trade idea in ZIM Integrated Shipping Services Ltd. (ZIM) last week, you are sitting on a hefty profit.
The market failed to post a follow-through day or 90% up volume day last week – key signs I’m waiting for to signal the market may have found the bottom.
We are still seeing more stocks making new lows than new highs. And breakouts to the upside are still meeting selling and mostly reversing lower.
Roundtrip Market
As a trader, this can be extremely frustrating.
For example, here’s a trade we took in my Alpha Stocks service this week…
We bought ProPhase Labs, Inc. (PRPH) on the breakout at $11.97 per share. The next day, we were up over 17%.
As prudent traders, we took profits on part of the position at the top and raised our stop to breakeven.
That turned out to be the right move, as the stock reversed all the way back over the next two days.
We got out with a nice average gain, but unless you are using very wide stops (which I do not recommend) and taking on a lot of risk, this environment is making it very difficult to hold onto stocks for longer-term moves.
The Big Picture
So, let’s take a step back and look at the big picture…
I’ve found the easiest way to “remove the noise” is to look at a weekly chart rather than a daily or hourly chart.
The Nasdaq has been unable to get above its 50-day moving average for several months. Even the 200-day has rolled up and is now pointing down.
We have also seen several weeks of high-volume selling, which is a sign that institutions have been dumping stocks en masse.
Until that changes and we begin to see signs of meaningful buying, there is no reason to be aggressively buying or having much exposure.
My personal account has been primarily in cash since November.
I continue to make short-term trades and take small positions here and there, but I have not been more than 25% invested at any point this year.
This is how I have been able to keep drawdowns to a minimum.
Progressive Exposure
I don’t have a crystal ball. Like everyone else, I cannot predict bear markets.
But I do understand “progressive exposure.” It works like this…
Look at your last four to five trades. Did you make money?
If not, cut your trading size in half.
After the next five trades, look at your results. Did you make money?
If not, cut your trade size in half again. If you did, bump it up.
It’s not rocket science. But it’s a powerful technique for minimizing drawdowns and keeping your losses small.
When your trades are not working, you will be trading very small amounts of money and taking very small losses.
When trades are working, you will be trading very large size and therefore having big wins.
Join Me on Monday
If you got into trouble this year and suffered a big drawdown, don’t beat yourself up.
The best money managers in the world have lost billions this year. Tiger Global, one of the top hedge funds in the world, is down by half.
The important thing is to learn from your mistakes. Take the lesson and move on.
With that in mind, I hope you’ll join me on Monday afternoon at 3:00 p.m. ET for our live Stealth Trades session…
I’m going to be outlining our plan for dealing with a market environment like this.
We’ll talk about inflation and how it is impacting the markets we track, and we’ll take a look at our Watchlist stocks and other potential ideas in more detail.
So again, please join me right here Monday at 3:00 p.m. ET!
Now, we’re focused on making money in the second half of the year, so here are three trade ideas for this week’s Watchlist to kick off the new quarter and the second half of 2022…
Chinook Therapeutics, Inc. (Long Idea)
I added Chinook Therapeutics, Inc. (KDNY) to the Watchlist last week, and it did not rise enough to hit our buy trigger.
As I mentioned in the previous update, KDNY is a biotech stock coming out of a huge two-year base pattern.
- Surge score: 97/100
- % Above 52-wk low: 79%
- Sales growth: +671%
- Return on Equity: N/A
- Triple momentum: yes
This week saw the stock pull back slightly to the 21-day moving average.
This is also a previous breakout level that could hold as support.
Traders could buy the stock here and use a 10% stop below the 50-day moving average.
The Howard Hughes Corporation (Short Idea)
The Howard Hughes Corporation (HHC) stock has been decimated over the last couple of months.
Shares of the real estate developer and manager fell from $105 to a low around $60 in just two months…
- Surge score: 26/100
- % Above 52-wk low: 105%
- Sales growth: +N/A
- Return on Equity: N2%
- Triple momentum: yes (short)
Shares are seeing a short-term bounce to the 21-day line that should continue to act as resistance.
Consider selling HHC short here near the $70 mark.
Citigroup Inc. (Short Idea)
When looking for breakout stocks to buy, I want the best of the best… Stocks with big earnings growth, big sales growth, bullish forecasts and high relative strength.
Identifying names about to break out lower means we want the opposite… Declining sales and profits, poor relative strength and a clear downtrend on the chart.
Citigroup Inc. (C) checks every box…
- Surge score: 35/100
- % Above 52-wk low: 2%
- Sales growth: -1%
- Return on Equity: 11%
- Triple momentum: no
This dumpster fire of a stock has been moving lower for a year now.
It is currently forming a shelf with support at $45.
If it breaks this level and makes a new low, consider going short with a stop at $49.20.
Finding Real Alpha
With the major indexes down double-digits and many of last year’s leading stocks down over 50%, consider checking out my Alpha Stocks trading service.
We recently recorded a 21.6% gain on the downside in only eight days as Pegasystems Inc. (PEGA) stock plunged…
As well as a gain of 21.3% in just 15 days in Permian Basin Royalty Trust (PBT) as that stock broke out of its range.
And this past Wednesday, we closed another winner in ProPhase Labs, Inc. (PRPH) for a two-day gain of 5.8%.
We also get together every Monday for an hour-long live session so that subscribers can ask questions and get guidance about our trades.
Live Coaching Session
Monday, at 3:00 p.m. EDT, we’ll be hosting our regular weekly coaching session for Stealth Trades.
We’ll send you a login reminder that morning, just so you don’t forget.
We’ll cover all of our new stocks on the Watchlist as well as the rest of the stocks inside Stealth Trades.
You need to attend this session to get the most from your subscription!
In the meantime, you can watch the replay of our latest Stealth Trades session right here.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades
P.S. If you’re ready to see what you could be missing out on, click here to learn more about Alpha Stocks now!


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