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Past Leaders Getting Pummeled in a Stock Picker’s Market

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Back on Nov. 23, I told you that “one year’s leaders often become next year’s losers.”

Well, that was certainly the case from 2020 to 2021…

We saw select stocks rip higher following the initial coronavirus panic…

And many of them notched triple-digit gains over the course of the year.

Investors made a killing owning stocks like Zoom (ZM), DraftKings (DKNG), Palantir (PLTR), Nikola (NKLA), Beyond Meat (BYND) in 2020.

Stocks like Peloton (PTON), DocuSign (DOCU), Tesla (TSLA) and Square (SQ) also saw massive rallies last year.

The list goes on and on.

So, if you bought any of these stocks in 2020…

Congratulations!

I just hope you took profits while the getting was good.

The Year “Buy & Hold” Died

If you need more proof that the “buy & hold” strategy is dead, just take a look at last year’s leaderboard.

PTON, ZM, DOCU, TSLA & SQ Drawdowns -- Source: Traders Agency
PTON, ZM, DOCU, TSLA & SQ Drawdowns — Source: Traders Agency

Most of the best-performing stocks of 2020 are getting taken out back behind the woodshed.

As you can see in the table above, it’s not pretty.

And these aren’t small stocks, either!

PayPal (PYPL), currently a $220 billion company, is down over 40% in just a few months.

Etsy (ETSY), still a $27 billion company, has fallen 31% in just two weeks!

This is the stock cycle in action.

As a reminder, legendary investor Richard Wyckoff first laid out his buy-and-sell stock cycle in the 1920s:

  • Stage 1: Consolidation
  • Stage 2: Accumulation
  • Stage 3: Distribution
  • Stage 4: Capitulation

And as I’ve been saying over and over again, Stage 2 is when you need to own stocks if you want to make money in the market.

I only want to own stocks when they are in a Stage 2 uptrend…

This is when demand is high… and prices are rising.

A Stock Picker’s Market

Once things get ugly and shares of once-popular stocks break their 200-day moving averages, I’m long gone.

When a stock trades below its 200-day moving average, it represents a major violation and a clear signal that it is no longer in an uptrend.

This is unquestionably a stock picker’s market.

The tape, or the action in the market, has been overwhelmingly red the last several days with only a few names showing strength.

Most of the stocks I’m seeing up big on the day are simply recovering a portion of recent losses and making a “dead cat bounce.”

Of the three names I added to this week’s Watchlist, only one of them has triggered by hitting its buy point.

Daily Chart of Amphastar Pharmaceuticals, Inc. (AMPH) — Source: TC2000
Daily Chart of Amphastar Pharmaceuticals, Inc. (AMPH) — Source: TC2000

Amphastar Pharmaceuticals (AMPH) hit our $21.75 entry point on Tuesday, so we will see how that plays out.

But until more stocks are breaking out in a healthy fashion, I remain cautious.

Lastly, if you’d like a step-by-step walkthrough on how to best take advantage of these weekly trades…

Be sure to check out my recent article, How to Follow My Weekly Trades, to know where I’m buying so that you can follow along.

Embrace the surge,

Ross Givens

Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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