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When the Market Is Weak, Focus on the Strong: Buy eBay, Sell Abbott Labs


Large players with lots of assets sell stocks that show signs of weakness and buy those that show strength. You should be doing the same.

MINYANVILLE ORIGINAL Stocks are always telling you a story as is the general market. The latter is mixed at best right now with the short term having turned bearish and the intermediate term still bullish. Individual stocks are mixed as well. Some still show signs of strength while others languish. Your job is to ferret out the strong and to concentrate your investments in them while avoiding everything else. When the general markets is strong and bullish, then almost everything works. When it isn't, you have to jettison anything that is suspect and concentrate in only the strong.

It just so happens that earnings season is a time where the curtains draw back and you see the stocks for what they are worth. Are they growing their revenues or not? Are they finding a way to increase the bottom line? Is the future bright in management's eyes?

These fundamentals show always up in the charts. They are pretty easy to see if you know what you are looking for. You just have to take your rose colored glasses off and see what is there. As an example, eBay (NASDAQ:EBAY) continues to do both -- top and bottom line and the charts show it. It is a stock I have recommended here previously and do so again.

All charts from

In this daily chart you can see how buyers are willing to pay up on earnings day to get more of the stock. Yes, the next three days has seen selling but notice how volume is tailing off and it is more about short term profit taking, not distribution. The volume trails tell you that the weakness in the general market is actually an opportunity to get into this stock.

But short term isn't all you should look at. What does the longer term time frame show you? Does it say the same thing? Does it compliment the short term picture? For eBay it does as seen here.

On a longer term basis, this stock keeps seeing more and more accumulation as prices rise. Why would anyone, let along large institutional type buyers, keep buying as price rises? The answer is simple: They believe it will rise even more, and that evidence is in the chart. It reflects the fundamentals of the company. It almost always does.
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