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

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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.

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Now contrast this with a stock like Abbott Labs (NYSE:ABT) which just reported earnings. As seen here, rather than buying, there was a rush for the exits.



In this chart you can see a clear bias to "get me out" as the earnings disappoint. This is not a signal to load up even though the longer term has been quite bullish.



The demand for Abbott has diminished, not increased. Do you want to buy when others want to sell? Generally that is not the case since the large sellers have decided that this isn't a place to be any longer. The good thing about a chart like Abbott is that they have a long term uptrend in place so this may be nothing more than a large consolidation period setting up. In that case, you have the ability to ride it out if you want and wait to see if they are able to right the ship but why do that? Why not put your money where it is working, rather than hoping on a stock like Abbott? Thank them for the gains they have delivered and promise them that you will return if they can return to their winning ways. Move on.

In a strong market, most everything works. In one that is struggling that is not the case. This market is struggling. Large players with lots of assets sell those that show signs of weakness and buy those that show strength. You should be doing the same. That is supply and demand at work. It shows up in the charts and it does so consistently during earnings season.

Twitter: @tatoday
No positions in stocks mentioned.
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