We’re Slashing Positions in 3 High-Flying Stocks By Half

This year, the stock market has been very cooperative. As of Wednesday afternoon, the S&P 500 has gained 13.5% year-to-date, and the Nasdaq Composite is up by nearly 17%.

Right now, we are less than a week away from another 25 basis point rate cut from the Federal Reserve. We are also less than two weeks away from what traditionally have been two very strong months for stocks, November and December.

A Touch of Turbulence

All of that combined would seem to be a green light for further buying, but instead of rallying, stocks are hitting a rough patch. This bout of turbulence has been hardest on the most volatile stocks, the type of names that we’ve leaned into in recent months.

The volatility in stocks has also been accompanied by a sharp pullback in gold and silver. Earlier this week, we covered our strategy for trading gold going forward.

High Flyers With Sketchy Fundamentals

There is always a temptation to buy the dip, and that may yet prove to be the correct play. However, we need to practice good risk management. Over the past few months, we’ve loaded up on some high flyers with admittedly sketchy fundamentals.

This turned out to be the right move, as most of those names outperformed the market by a significant margin. Now, the better move would be to protect our gains.

It’s time to thin the herd. We’re reducing the size of the following positions by half:

1. Reddit Inc. (RDDT)

Reddit’s  (RDDT)  chart indicated that it was time to buy on August 1, when this article was published. At the time, the San Francisco-based social discussion platform was about to break out of a cup-and-handle formation (shaded yellow).

Now Reddit is sagging. The stock has fallen beneath its 50-day moving average (blue). Reddit’s earnings are scheduled to be reported in just one week. Now seems like a good time to lighten this position. 

2. Oklo Inc (OKLO)

Oklo  (OKLO)  has had an amazing run, gaining 450% year-to-date. When we first recommended the Santa Clara-based nuclear technology company on July 22, it was trading in the low 60s. 

On Wednesday, Oklo closed at $120. Despite the fact that Oklo is well off its highs, we can lock in a gain of nearly 100% on half of the position now.

3. BWX Technologies (BWXT)

Another name that has been good to us in the nuclear sector is BWX Technologies (BWXT). In July, when we first recommended BWXT, we were able to enter in the $140 area. Now, we’ll close half of the position in the $190 area.

We’re not fully exiting these names, just reducing the position size by half. We’re also temporarily placing a moratorium on adding to any positions. As a wise trader once said, take profit when you can, instead of when you must.

At the time of publication, Ponsi was long OKLO, RDDT and BWXT.