Often what you don’t buy is as important — or more important– than what you do buy.
Here is a long list of issues we wouldn’t buy right now:
HPQ MO ABT SVU JHJ MDT MSFT TEX XLF KBE UNH VLO WAG
Cursed by the curiosity that killed the cat we can’t keep from looking at stock lists compiled by people who should know better. Mark Hulbert compliled this list by finding stocks that “top managers” held in common.
Well if you had bought these stocks six months ago you would be in great shape, and if you owned them now you should be finding the Basing Points and setting some stocks and clucking like a hen that had a nest full of eggs.
But if you were looking to buy right now there is not one we would buy today. Why not? In general they are all at the top of their trends with apparently little reward left in them. In some cases they have even broken mid term trend lines.
If we were going to look to buy them (we won’t but you might) then we would wait until they took out their recent highs. In that case you just might wait forever, but it at least sets some conditions rather than plunging in now while there is little if any reason.
Seen above HPQ is an example. More likely a top or sideways pattern than more uptrend. But what is the possible reward anyway?
Similarly with ABT. Right at the top of its three year range. It’s going to double? With a pattern that looks like a top? If it broke above 58 we might be interested. If it broke below 51.41 we would be shorting it. But we wouldn’t be buying it right now. That would put us into the company of professional mutual fund managers.
And if you’re known by the company you keep we’d rather be in the company of layabouts and roustabouts.
UNH. Another toppy looking stock. With the dreaded bull trap — snap pattern. A toppy pattern and a broken short term trend line.
The entire list has characteristics like this.
In fact, you know what? This list could be total disinformation. You could have been fed this list to encourage you to buy so these managers could distribute these stocks under cover of night. We’re not saying Mark Hulbert did it deliberately. He just did it as a part of Wyckoff’s Composite Operator.
Don’t say you weren’t warned.