Early last week, I suggested that it was time to get a little defensive while the market consolidated or corrected.
After several days of selling off, Friday’s higher open was the bull’s opportunity to run the market up.
Unfortunately, the market sold off.
This week is now an important test. Here’s how to play it.
The market was never strong after the initial open on Friday, but the worst of part of the day occurred late in the session.
Summer afternoon selloff on a Friday is not something to worry about on its own, but if it continues today, it will be worrisome.
In addition to the chart pattern, this will be a busy week for earnings announcements.
Therefore, a trending day in either direction could gain momentum.
To keep it simple, if the SPY is under 298 on Monday, I’ll be cautious.
With that in mind, it’s still a good time to find stocks that are pulling back or setting up to buy when the market looks ready to resume its up trend.
Today’s trade idea that fits that criteria nicely is New York Times (NYT).
An old newspaper may seem like a boring trade, but if you had that attitude in January, you would have missed a 50% move.
Think of this company as selling online content. It’s got plenty of it, and it’s doing a good job of adapting. Last quarter it reported 28% year over year digital subscriber growth.
It doesn’t report earnings until August 7th so there is time for a run-up into earnings, at which point you can decide if it’s worth the risk to hold on.
First, however, it needs to move up.
Currently, it’s pulling back into a big consolidation pattern.
As long as it’s trading over $34, it’s a candidate for buying the next move higher.
The setup on this chart is simple.
A move over $35.25 represents the trigger to enter for a move higher, and the stop should be under $34.
My game plan would be to look for an opportunity to get long before the August 7th earnings report and then hold through earnings if I have at least $1.50 profit.
Rick Nartarian, Chief Investment Officer
The American Investor Daily