Fallondpicks.com: How stocks suffer

After a number of quiet weeks for exiting positions it turned into a whirlwind of stop hits for my newsletter picks; 17 stocks were stopped out on today's action leaving some 148 stocks still in play.

Going back over the last year it appears trouble travels in groups. High numbers of stop hits occurred on April 29th (17 - but this included stocks from a period of a few days), March 8th (9), March 7th (13), October 13th (15), October 12th (16), October 6th (19), October 5th (11), September 22nd (8), September 21st (8), September 15th (11), August 5th (9), August 4th (8) and May 1st (10).

A large proportion of the stop hits from September through to October were from short-side positions, but the important thing to note was the length of time stocks suffered - it wasn't just a couple of days and the closets were cleaned, but overall it was a couple of months before the cupboards were bare. Thursday's action may be a bad omen for the future if this is the only the tip of the iceberg. Certainly it doesn't bode well if looking to buy the market over the next couple of months.

Another artifact of the weakness can be seen from current newsletter April stock picks; only 33% of Subscriber and 47% of Breakout stocks are still in play (n=51 and 50 respectively). Expressed another way; the maximum % of profitable trades possible for these months is now limited to 33% and 47%. Compare this to November 2005 where 58% of Subscriber picks were profitable with a further 9% still in play (for a potential maximum % profitablility of 67% (n=54)), and 46% of Breakout plays are profitable with a further 11% still in play (for a potential maximum % profitabliliy of 57% (n=55)).

Buyer beware.

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