Don’t Forget The M When Buying Stocks
A key part of the CAN SLIM formula is the M, which stands for market. Most stocks, even the very best, follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when the stock market goes into a correction.
A stock market rally that kicked off 2022 soon fell on its face. The market tried to rally but has just fallen back into correction territory. The S&P 500, the Nasdaq and the The Dow Jones Industrial Average all hit 52-week lows last week, though they moved off lows Friday.
The market is in bad shape. This means you should avoid buying stocks altogether. Instead, it is a good time to start raising cash — start by selling your weakest performing stocks first. If you have great conviction about a stock and have a profit cushion, consider holding through the correction. You also move entirely off margin.
But you should stay engaged with the market and get to work on building a robust watchlist. Looks for stocks contracting less than others or less than the main indexes. These will tend to have rising relative strength lines. The names below are good candidates.
Remember, there is still significant headline risk going forward. Inflation remains a key issue while the Russia-Ukraine conflict is a wild card that has proved its ability to shake the market.
But remember, things can quickly change when it comes to the stock market. Make sure you keep a close eye on the market trend page here.