Friday, January 05, 2007

Leaders Tank! (GROW, ROS, VTS, IAAC, CRVL, GEF)


Last month I was getting antsy about shorting this market. As a result I nibbled a little at the QID and was stopped out rather quickly. What I quickly realized was that I was forgetting one important fact about market tops, namely, the leaders must tank before the rest of the market follows suit. I pointed out US Global Investors (GROW) as one of the leaders to watch.

Check out the first chart I have on the left. GROW has tanked and tanked hard! As I said yesterday, I tried to short it yesterday but couldn't get my hands on any shares to borrow. It looked like a fortuitous event when GROW shot up 5% this morning. But that quickly changed when a midday reversal took place.

Check out some more of the leaders.

I have a particular fascination with climax tops. ROS is a classic example.













Here are some more leaders that have come off of their highs with volume.






































5 comments:

TradingGoddess said...

Hi Paul,

I am long CRVL. What does your crystal ball say is in store for CRVL in the near future? Will it continue to decline or is the profit-taking over?

TIA

Paul Stiles said...

Hey Tia,

The strength shown by the market last week probably means that you are ok for now, but with CRVL almost 100% above the 200 dma I would probably be one of the profit takers. Also, just before the large decline, CRVL was making new highs on much weaker volume. This is always a big warning sign. The bounce on Friday was also pretty weak and on much lower volume than the ealier decline.

I would be very, very careful.

Paul

TradingGoddess said...

LOL! - "TIA"

I meant "thanks in advance"

Paul,

Does this chart make you have any change in your original thoughts?

Thanks for your opinion. I truly value seeing things from other people's eyes.


:)

Trading Goddess

Paul Stiles said...

Oops, I guess you learn something new everyday. I guess I'm too old to know all of the acronyms.

Using RSI and MACD for market leaders can be very dangerous. They usually work best with stocks that are in consolidation patterns. My sell rules are based on William O'Neil's methods, which work very well with high-flying growth stocks (like CRVL).

Look for CRVL to retest the highs and if there is a failure, then get the hell out of there fast. With only a 7.8 million float, it is easy to push around.

TradingGoddess said...

Thank you Paul!

I appreciate your opinion, as well as your honesty!

Happy trading to you and I wish you many greenbacks!