When are stocks vulnerable to correction | stockbee

12/27/2007

When are stocks vulnerable to correction

Yesterday I said solar energy sector and fertiliser sector stocks are vulnerable to correction at these level. Similarly I had warned about shipping sector before it topped. One of the easiest way to figure out which stock is vulnerable to correction is to look at "Price vs 200 Moving Average" . When the stock is up 100% or more from 200 moving average (which on Telechart sort means value of 200 plus) , it is vulnerable to correction.

IBD studis of top performing stocks show that they top at around 110% from the 200 day MA. From time to time IBD talks about this sell rule.

If you sort the All Stocks list by "Price vs 200 Moving Average" , you will notice most of the stocks with 190 plus readings are solar and fertiliser stocks.



Stocks up 100% plus from 200 day MA

CSIQ,Canadian Solar Inc (Google  Yahoo  Earnings  Chart
EMKR,Emcore Corporation (Google  Yahoo  Earnings  Chart
FSIN,Fushi Intl Inc (Google  Yahoo  Earnings  Chart
FSLR,First Solar Inc (Google  Yahoo  Earnings  Chart
JASO,Ja Solar Hldgs Co Ads (Google  Yahoo  Earnings  Chart
LUNA,Luna Innovations Inc (Google  Yahoo  Earnings  Chart
MOS,Mosaic Company (Google  Yahoo  Earnings  Chart
MTL,Mechel Steel Group OAO ADS (Google  Yahoo  Earnings  Chart
QSC,Questcor Pharmaceuticals (Google  Yahoo  Earnings  Chart
RICK,Rick's Caberet Intl (Google  Yahoo  Earnings  Chart
RIGL,Rigel Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart
SOLF,Solarfun Power Holdings Co Ltd (Google  Yahoo  Earnings  Chart
SPIR,Spire Corp (Google  Yahoo  Earnings  Chart
STP,Suntech Power Holdings Co Ltd (Google  Yahoo  Earnings  Chart
ZIXI,Zix Corporation (Google  Yahoo  Earnings  Chart

Another thing which signals likelihood of correction in a stock is climax move. Moves of 50% plus in a month on a stock which already has been rallying, typically lead to correction in the stock in next small time frame.

Stocks up 50% plus in a month

ARTW,Art's-Way Manufacturing (Google  Yahoo  Earnings  Chart
ASTI,Ascent Solar Technologies Inc (Google  Yahoo  Earnings  Chart
ASTIZ,Ascent Solar Technologies` Inc. (Google  Yahoo  Earnings  Chart
AVR,Aventine Renewable Energy Holdings Inc (Google  Yahoo  Earnings  Chart
BMTI,BioMimetic Therapeutics Inc (Google  Yahoo  Earnings  Chart
BRKR,Bruker Biosciences Corp (Google  Yahoo  Earnings  Chart
CHNR,ChinaNatural Resources (Google  Yahoo  Earnings  Chart
CSIQ,Canadian Solar Inc (Google  Yahoo  Earnings  Chart
CSUN,China Sunergy Co Ltd (Google  Yahoo  Earnings  Chart
CTDC,China Technology Development Group Corp (Google  Yahoo  Earnings  Chart
ECHO,Electronic Clearing House (Google  Yahoo  Earnings  Chart
EMKR,Emcore Corporation (Google  Yahoo  Earnings  Chart
ESLR,Evergreen Solar Inc (Google  Yahoo  Earnings  Chart
FSIN,Fushi Intl Inc (Google  Yahoo  Earnings  Chart
HES,Hess Corp (Google  Yahoo  Earnings  Chart
HOKU,Hoku Scientific Inc (Google  Yahoo  Earnings  Chart
HRBN,Harbin Electric Inc. (Google  Yahoo  Earnings  Chart
IRW,Ibt Bancorp Inc (Google  Yahoo  Earnings  Chart
JASO,Ja Solar Hldgs Co Ads (Google  Yahoo  Earnings  Chart
JRCC,James River Coal Company (Google  Yahoo  Earnings  Chart
LDK,LDK Solar Co Ltd (Google  Yahoo  Earnings  Chart
LEAP,Leap Wireless International Inc (Google  Yahoo  Earnings  Chart
MELI,Mercadolibre Inc. (Google  Yahoo  Earnings  Chart
NEXT,Nextest Systems Inc (Google  Yahoo  Earnings  Chart
PFB,Pff Bancorp Inc (Google  Yahoo  Earnings  Chart
PTT,Vcg Holding Copr (Google  Yahoo  Earnings  Chart
RICK,Rick's Caberet Intl (Google  Yahoo  Earnings  Chart
RIGL,Rigel Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart
RZ,Raser Technologies Inc (Google  Yahoo  Earnings  Chart
SDTH,Shengdatech Inc (Google  Yahoo  Earnings  Chart
SOLF,Solarfun Power Holdings Co Ltd (Google  Yahoo  Earnings  Chart
SPIR,Spire Corp (Google  Yahoo  Earnings  Chart
SVNT,Savient Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart
TSL,Trina Solar Ltd. (Google  Yahoo  Earnings  Chart
ULBI,Ultralife Batteries Inc (Google  Yahoo  Earnings  Chart
USBE,US Bioenergy Corp (Google  Yahoo  Earnings  Chart
VSE,VeraSun Energy Corp (Google  Yahoo  Earnings  Chart
YGE,Yingli Green Energy Hlds Co (Google  Yahoo  Earnings  Chart

2 comments:

Mike said...

Pradeep, you noted SDTH as one stock vulnerable to correction. The next day it fell 10% but yesterday it came back 14%.

I am wondering if a stock such as this having gone up so fast so soon is a risky play now? Would you be buying it now given that it came back very strong after the 10% drop, or is this stock potentially one that can still correct 25% or more in short order?

Appreciate your thoughts on such high, fast runners.

Mike

Pradeep Bonde said...

I always buy such stock after a 10 to 20 day corrections. Buying at such elevated levels is risky.