The Market is Officially Overbought; Protect Assets Accordingly

The Market is officially overbought, according to the Sentiment Table from Stock Traders Daily. 

The Sentiment Table has been capable of firing contrarian trading alerts ahead of reversals in the Market (no guarantees of course). The alerts are restricted to periods of volatility, and this is a direct result of how the rules have been defined.  The best times to trade are volatile times, so the Sentiment Table Strategy only trades in the best environments by statistical definition, and during the other times it waits patiently for opportunities. 

This is a strategy and an indicator:

  • Investors should protect profits. 
  • Investment Advisers should also protect client assets. 
  • Traders should consider the short side of the Market.

If the Market itself is overbought, investors in stocks that have been particularly strong might also be wise to protect gains. 

Below are four of the most prominent stocks in our midterm-strong category, but NFLX and TWTR have been much stronger than BBBY and GME on a longer term scale.  The technical data for each stock below represents near, mid, and long term support and resistance levels, with a bias for each.

Notice the difference in the long term column for Netflix (NASDAQ: NFLX) and Twitter (NASDAQ: TWTR) vs Bed Bath and Beyond (NASDAQ: BBBY) and Gamestop (NYSE: GME).

Netflix:

Technical Summary for NFLX

Term →

Near

Mid

Long

Bias

Strong

Strong

Strong

P1

392.65

373.59

346.15

P2

408.84

404.39

391.01

P3

416.19

438.15

437.42

Twitter

Technical Summary for TWTR

Term →

Near

Mid

Long

Bias

Strong

Strong

Strong

P1

42.43

40.82

34.02

P2

45.06

46.09

41.17

P3

46.99

51.80

48.65

Bed Bath and Beyond

Technical Summary for BBBY

Term →

Near

Mid

Long

Bias

Strong

Strong

Neutral

P1

20.05

18.68

15.35

P2

20.98

20.28

18.86

P3

21.63

21.95

22.55

Gamestop

Technical Summary for GME

Term →

Near

Mid

Long

Bias

Strong

Strong

Neutral

P1

14.31

12.91

10.09

P2

15.04

14.67

12.75

P3

15.56

16.38

15.42

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