5 Examples of How I'm Managing Trades in a Weak Market
Even a sloppy tape has pockets of opportunity.
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The CPI report came in slightly lighter than expected, but shares of JPMorgan Chase (JPM) are trading lower following an OK earnings report. There are several pockets of weakness, and only about 45% of stocks are trading in positive territory. New 12-month highs stand at 238, which is still a healthy number, but leadership is narrowing.
Small-caps are taking a breather after a strong run, and the banking sector is deeply in the red. Alphabet (GOOGL) is the big-cap technology leader, but it is not pulling the rest of the market higher. My momentum screen is very quiet, with only about 25 stocks up more than 10%. This is not particularly exciting action, but it is the kind of market that creates opportunities for patient investors.
Buying Pullbacks Into Support
One stock I am actively working is Xeris Biopharma (XERS) . The stock spiked higher on good news last week and is now pulling back toward a support zone and an open gap on the chart. I believe management will deliver solid guidance for the year, although the timing is uncertain. I trimmed some shares into strength last week and am now using this pullback to slowly rebuild the position.
This type of trade is typical of what I do in a choppy market. I am not trying to predict the exact bottom. I am simply scaling in as the stock tests logical support.
Adding to High-Conviction Biotech on Weakness
Another example is ClearPoint Neuro (CLPT) , which I wrote about here earlier this week. The biotechnology sector is weak again, leaving many smaller names effectively bidless. I want to increase my CLPT position and will make incremental purchases as the stock tests its 200-day moving average.
Sector-driven selling often creates attractive entry points in fundamentally strong companies. This is a stock I am comfortable building when the tape is sloppy.
Selectively Adding Strength
Not everything is weak. Solaris Energy Infrastructure (SEI) is one of the stronger stocks on my screen today and one I would like to add to. The stock has failed several times since September to break out above the $55 area, but I think it is setting up for another run fairly soon.
SEI trades relatively thin for its market capitalization, so I want to see how it behaves later in the session before adding size. In this market, patience matters even when a stock is acting well.
Monitoring Extremes in My Portfolio
On days like this, I review both the biggest gainers and the weakest holdings in my accounts. The top performer today is Sensus Healthcare (SRTS), which appears poised for a strong earnings report. There has been recent insider buying and the company received an important new insurance billing code, both of which improve the outlook.
At the other end of the spectrum is Flotek Industries (FTK) , which provides specialty chemicals and AI-driven services to the energy sector. The stock is often pulled around by oil prices, even though it is not highly leveraged to them. FTK is holding its 50-day simple moving average, and I do not see any company-specific news driving the weakness. I will continue to monitor it closely and may reduce exposure if that support level fails.
Managing Risk While Letting Setups Develop
This is a good snapshot of how I manage positions on a sloppy market day. I am trimming into strength, selectively adding on pullbacks to support, and closely monitoring stocks testing key levels. The good news is that even in uninspiring markets, opportunities are always developing for investors who stay disciplined.
At the time of publication, Rev Shark was long GOOGL, XERS, CLPT, SRTS, FTK and SEI.
