Is Warren Buffett Adding AAPL and INTC Stock?
The market reversed overnight losses and posted gains yesterday. Volume was again tracking very low, which isn't a surprise anymore. But technology stocks led the charge higher, and banks recovered slightly too.
Before Warren Buffett purchased (made public the purchase) shares of technology behemoth IBM (Nasdaq: IBM) the Nasdaq was a lagging index. Since technology stocks often do well in growth phases, I was concerned that the Nasdaq began to underperform against the other indices this month.
But after Warren Buffett made his IBM purchase public, the technology stock group has done well. And it's been the big cap American technology stocks that led the charge higher.
Yesterday, Intel (Nasdaq: INTC) and Apple (Nasdaq: AAPL) posted 2.5% gains each. The success of AAPL and INTC yesterday could indicate increased investor attention for those two companies, or perhaps Warren Buffett is beginning to build a stake in another technology position.
For our purposes, it's great to see technology stocks return to the leadership role. The transition of a risky sector from laggard to leader could be a precursor to a bullish trend in the market.
Over the past month the indices have moved sideways. The bears managed to drag the indices lower by a few percent on occasions, but the bulls nearly always defended near term support zones.
To the bears credit, they began to develop and defend near-term resistance areas too. And for the past month the market has been stuck in about a 3.5% trading range with neither group being able to gain any momentum. In fact, over this past month, the market has not recorded three or more consecutive up or down sessions - talk about volatile.
The volatility has obviously had a negative impact on the TradeMaster Daily Stock Alerts portfolio because we have gotten stopped out of nearly every trade before it could build bullish momentum. The recent string of losses has been unfortunate, but not unexpected. Equity trading is a momentum game. Sometimes that momentum is the result of a trader being hot or cold but usually it has more to do with the market itself.
The trader will go through hot and cold periods, but that is normally a reflection of consolidation in the market. After all, the market spends nearly three quarters of its time trapped in a range. And since the market comprises itself of individual stocks, it goes to reason that most stocks will also spend the same amount of time trapped in a trading range.
When the market is moving sideways so are stocks. And while stocks are likely to eventually move higher that is not a guarantee. The indices could easily plummet after consolidation phases. And you don't want to be holding many (if any) bullish positions should that occur.
My stop loss strategy has resulted in a few 3% and 4% losses recently, but that same strategy protected the TradeMaster Daily Stock Alerts positions from massive declines during the sell-off this August when most stocks declined by 25%.
