Iatrogenic stock market speculation
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Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is principal of Marder Investment Advisors Corp. Previously, he served as chief market strategist for Ladenburg Thalmann Co. An election outcome that caught most by surprise catapulted shares into a high-volatility orbit on Wednesday and Thursday, before the action settled down somewhat on Friday.
The theme of the week was to capitalize on those industry groups that were discounting the benefits of a Donald Trump presidency. The banks and brokers , discussed here numerous times as longer-term leading indicators, exploded on word of Trump's election upset.
Another feather in the market's cap was the strength seen in small-capitalization issues IWM, In part, this was due to the large number of smaller banks responding to the week's sharp rise in the year yield from 1. The market generally does not get into trouble until after smaller names go through a period of underperformance first. Breadth measures like this, however, usually take some months of deterioration prior to a primary top in the averages. Among the names, Colucid Pharmaceuticals US: CLCD is a biotechnology company that went public 18 months ago.
Net losses were recorded in each of the past three years.
Most analysts on Wall Street who follow Colucid are expecting more losses this year and next. Since then, CLCD has been forming a six-week consolidation as it digests its outsized September gain. Of note is the dry-up in volume in this pattern. This objectively says that profit-taking following the giant advance is not worrisome. As always, a protective stop should be used to mitigate risk, along with a starter position that is half normal size, or less.
This initial position could be added to if the stock proves itself. In most cases, a position should not be entered when price is extended, i.
Most analysts who follow the company predict a loss of 44 cents a share for this year, followed by a cent-a-share profit in Despite the soggy bottom line, WIX has been racking up impressive revenue growth for the past two years. Price is eight weeks into a basing pattern. Like Colucid, above, at least a few days of sideways movement would be preferred prior to entering on a breakout. After losing money from to , most analysts are looking for another loss this year, followed by a trivial 2-cent-a-share deficit in Price is currently extended past the pivot, i.
In summary, given their historical tendency to be leading indicators, last week's explosive lift-off in the banks and brokers augurs well for upward revaluation in the averages. As well, strength in speculative biotech titles and smaller shares is a sign that the speculative sentiment is alive and well, and suggestive of richer quotations.
Speculation - Wikipedia
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Speculation
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