EarningsBeats.com Digest for January 11, 2021
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Trying to Spot a Bottoming Stock
If you know our philosophy at EarningsBeats.com, then you probably realize we don't spend a whole lot of time trying to find bottoms in stocks. It's a very difficult exercise and generally, what's the point? Wall Street, via relative strength and other technical factors, tells us each and every day what they're buying. Buying "ahead" of Wall Street would be great - if you knew that Wall Street was getting ready to begin buying. But again,
it's very difficult to time that. Something needs to be suggesting that accumulation is just beginning or that a stock's relative strength is improving. Let's use Amgen (AMGN) as an example:
Biotechs ($DJUSBT) are on the verge of an absolute price breakout. Making that breakout would be the first step in considering AMGN. A second development to watch for would be for the DJUSBT to make a relative breakout out of its current relative downtrend. Clearing its recent relative high could be the trigger. Then at the stock level, I like AMGN's recent break of its downtrend and its PPO now clearly above its centerline and moving
higher. AMGN recently set a new 52 week low vs. its biotech peers, which is definitely concerning. It's been improving, but there's much more work to do. It needs to continue pushing higher.
The bottom line is to be careful with trying to catch bottoms. If you do attempt it, make sure you keep fairly tight stops in place. Riding a relative loser down for a long period of time will destroy your overall return.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better Timing. Better Trades."
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