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Market Sentiment (Stocks on NYSE, NASDAQ, AMEX)
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Nov. 1, 2016, 12:59 p.m. EDT

The market’s message to speculators is loud and clear

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About Kevin Marder

Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is principal of Marder Investment Advisors Corp. and a contributor to The Gilmo Report. Previously, he served as chief market strategist for Ladenburg Thalmann Co. and developed institutional fixed-income risk management software for Capital Management Sciences.

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Our last column discussed the state of the market's leading growth issues, and how " of the growth-stock leaders, about half remain buoyant, while the other half have suffered from technical breakdowns ."

Since then, things have deteriorated to the point where more leaders have materially broken down than not. This is an objective signal to be reducing long exposure even more than was noted in the last report.

For letting the market tell its own story is always the best course of action.

For some time, Amazon.com /zigman2/quotes/210331248/composite AMZN +0.57% has been viewed here as the most important growth stock, at least in terms of being a benchmark for the whole sector. It was a decided negative, then, when the online retail giant recorded three major distribution days last week.

In so doing, AMZN sliced through the 50-day moving average line, an area that provided demand for the shares on two prior occasions since its big move commenced in February. If the shares cannot regain the 50-day moving average, this would indicate a weakness not seen on this advance.

For a larger chart, please click here .

Chart created using MarketSmith . ©2016 MarketSmith Incorporated. All rights reserved.

As for the Nasdaq Composite, its recent rebound was cut short by four-straight down days last week. Rubbing salt into the wound was volume, which came in well above average on Thursday and Friday. This degree of volume reflects a certain level of conviction among sellers.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

While aggressive momentum players using a medium-term timeframe should be operating with a generous if not full cash position, the following issues are mentioned in the event of a pick-up in market tone.

Among the names, Proofpoint is a cybersecurity interest that protects people, data, and brands from threats. Most analysts on Wall Street who cover the company expect it to post a 32-cent-a-share profit this year and a 50-cent profit in 2017, the latter a 56% surge over that of the prior year.

Top-line growth has been quite steady at higher levels, rising 38%, 35%, 37%, 37%, 33%, 37%, 41% and 44%, respectively, in the most recent quarters.

Technically, the shares are under solid accumulation (focused buying) as they form a seven-week consolidation with a 16% depth. Price has spent much more time on the left side of the base than the right side. This is viewed as a plus.

Aggressive speculators may consider using the Oct. 24 high of 79.78 as an entrance pivot for a breakout play. While PFPT could also be picked up at its current level on a pullback play, in most cases, the widespread weakness of the general market favors a breakout.

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.e. more than 5% past the top of its base.

/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,242.76
+18.48 +0.57%
Volume: 2.30M
Jan. 14, 2022 4:00p
P/E Ratio
63.41
Dividend Yield
N/A
Market Cap
$1644.56 billion
Rev. per Employee
$352,824
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