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The action Monday and Tuesday is typical for a consolidation period. That is where the overall market is about breakeven yet some stocks are big winners while others are big losers. Often it has to do with what industry or market cap the company belongs to (right now small caps are getting hammered while large caps are enjoying some time in the sun). And quite often they switch places as the consolidation period rolls on.
At times like these you begin to realize that recent price action for your stocks is not a good guide of where they are headed next. For me there are 2 stronger indicators of future stock prices:
1) Earnings Estimate Revisions: Yes, the power behind the Zacks Rank. If they are going up, then a stock has a much greater likelihood to outperform over next 1-3 months.
2) Valuation: If the reasonable valuation for a stock is greater than what it trades for today, then there will be a natural pull in that direction over time.
Price action comes in a distant third behind these two in determining where a stock is headed next. That's because you have to realize that the earnings estimates and valuation are the "cause" behind the "effect" of stock prices over time.
Remember that institutional investors are the 800 pound gorillas of the investing world managing trillions in assets. The majority of these money managers rely upon the above fundamentals to determine what to buy and sell.
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Big funds and pension plans try hard to keep others from spotting their key moves too soon. They need time to go all in, drive up the prices, and make big profits.
Before now, you could only catch their moves early if you had the time and expertise to comb through obscure SEC filings. Today, a Zacks strategy brings the best of them to you at "first sniff" so you can enjoy the full profit ride. During 2013, this approach more than doubled the S&P 500 with a stellar overall gain of +66.4%.
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