In any market, there are stocks and sectors that will go up and down. After all, the market is forward-looking in nature and is always about six months ahead of Main Street. This is why it is so important to follow the charts and ultimately the trend.
These days the large-cap technology stocks seem to be leading the markets higher. Leading stocks such as Apple Inc (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), Amazon.com Inc (NASDAQ: AMZN) and Microsoft Corp (NASDAQ: MSFT) are just of few of the large-cap tech stocks that are in a confirmed up-trend and leading equities higher. Until these stocks reverse on heavy volume and start breaking key support levels they remain extremely bullish at this time. Why fight this trend? As a trader, we want to go with the market.
Now on the flip side, there are the energy stocks that are in a bear market. Has anyone looked at the price of Exxon Mobil Corp (NYSE: XOM) lately? The stock is now trading below all of it’s key moving averages, especially on the large time frames. This is what we call a confirmed down-trend. These down-trending energy stocks will often have short term counter trend bounces, but there is really no reason to own these stock right now. There are also many other energy stocks that are looking very similar to XOM stock. Why would anyone bother to own these stocks until they reverse on heavy volume and break the downtrend.
The bottom line, don’t fight the trend. The old saying that the trend is your friend is still true to this day. Traders must try to stick with the trend as long as you can. The charts will tell us when the trend breaks and tells us otherwise.
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