Looking to buy? Wait for the all-clear
We're now seeing a bottoming process we've seen time and again. At a certain point, we'll see a shift as everyone realizes the panic has passed and the sellers are done.
Here's what happens next. The analysts, who have watched their high-multiple stocks get wrecked, soon won't be able to take it anymore. They'll get tired of the phone calls. Tired of playing defense. They won't want to be on the hook for BioMarin Pharma (BMRN) -- notice the Goldman downgrade last night? -- or Concur Tech (CNQR) or Isis Pharma (ISIS). They know the gains are going away, and they simply can't take the pain.
So they'll downgrade.
At the same time, the short positions, which hadn't been that big, grew by leaps and bounds Monday and Friday, so the base is in for the downgrades. We could get a combination of an aggressive wave of selling, plus some short covering, and then some intraday upgrades that work. Not yet, though. We need to lose adherents in order to get bottoms.
Right now the analysts are panicked. They are trying to figure out what to say -- what could reverse the waves of selling. They realize now that they should have downgraded before. They know they missed the top. But they look at where the stocks have gone year over year, and they notice that they are still up on their recommendations and they figure: Why not pull them? There are no real catalysts that they can see that would turn these around.
This is all part of the bottoming process that we have seen time and again in the momentum stocks. At a certain point -- not until you get that action that comes from a knockdown by a downgrader -- comes a whoosh in which volume expands, clearing out all of the sellers to speak of. Then the stock trades up to where it opened and then even higher, closing nicely in the black. That's the sequence. When that happens the next day? You get a gap up from the get-go as everyone seems to realize at once that the panic has occurred and the sellers are done.
What's unfortunate right now is that the sellers simply can't seem to finish up and there's no real panic. The stocks get pounded, and then they come back from the low but not enough to get in the black. That just emboldens new sellers tomorrow, as all of these managers know the same thing I know.
Without the downgrades, you run the risk of having a stock rally ever so slightly, followed by a downgrade that will rip your face off. That's why it is always better to wait for the all-clear that the downgrades generate.
There may be a handful of high-multiple stocks that won't be downgraded, and I include Priceline (PCLN) and TripAdviser (TRIP) in those. They can go down, but the analysts aren't going to desert them. Those are the first two I would recommend picking at today if you have done no buying.
The rest? Let's see the pattern unfold. If it doesn't, no rush. No need to be a hero.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners.
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Wait for the "all clear"...WTF?? We are not waiting at a Railroad Crossing...
I think Cramer is full of poop, well actually he probably is..?
........ with an oink oink here and a har har there...... here an oink there a har..... everywhere a yuk yuk....... fatty lives in a funny farm e i e i o
When Ms. Bambi used to be on the Farm...She snagged the barbed wire, while her and Fats tried to escape....
There was one big woooosh, as she flew out of sight over into the neighbor's pig pen...
Then the hogs ate her....And choked on the plastic..
Fatty just sat down and cried...
Did you hear the one about Bobo at the Grocery store?...Too funny.
Caught in produce section, fondling the fruits...
stocks going up. I bet my mutual fund money from last week's payroll is being spent.
~ boy, aint I powerful to be able to sway markets like that?!?!?!
Priceline & TripAdviser? Wow Jim, you really 'went out on a limb' there. Could it have anything to do with summer vacation bookings? Ummmmm !!
Jimmy we were selling some of our Railroads this morning...
We did pass Go and made a decent return....Collected over $200...Then landed on free parking..
But I'll wait for the "all clear" from you and CGT....And maybe buy something with freed up cash and some recent divvies...
Look's like the scumbags is making a run at it...Go scumbags..!!
Good solid advice from Jim. Common sense learned from walking the walk. I have no confidence in the direction right now but it seems the Bull has some scrapes and his knees seem a little weak. Layoffs seem to have added to the bottom line lately and coupled with higher prices in the emerging markets make it some what suspect that these profits levels will continue a whole lot longer. Share buybacks coupled with rosy profit predictions seem to be running out of steam as well. I suspect deflation is the biggest concern with the FED but I sense they have given up on low interest rates and bond buying being the answer. After some four years of goosing the markets it doesn't appear to have helped but mostly harmed main street. Perhaps some new tea leaves in the FED tea ball might work. Maybe historically higher interest rates are the nemesis to stock prices but who knows maybe that will keep us from falling into the Japan style of stagflation most of us see as the new future for America.
Bye bye fatty.
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