The Harder They Fall

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The bigger they are, the harder they fall

When preparing for a major market correction, as described in my previous post “Buckle Up,” I focus my research around the highest performing industries and their leaders over the past 6 to 12 months. In my experience, the companies that climbed the highest tend to give back the most during a reversal. Additionally, I look only at growth stocks that are not paying dividends. Here are my top 5…
Industry 1: Healthcare

A clear winner is Actavis Plc. (ACT). This pharmaceutical company trades on the New York Stock Exchange and develops, manufactures and distributes its products throughout the world. They are set to announce earnings today (August 5th, 2014) before the open.
Within the last 12 months, ACT has grown more than 77% from 130.06 to a “Highest High” of 230.77. Depending on the earnings report, I would start looking for short opportunities between 224 and 230. I would be prepared to stop losses on a significant close above 230 on higher volume. To the downside, significant areas are: 214, 204, 193, 186, 176, and 159.
Industry 2: Technology
Technology is plagued by volatility during a market reversal. You could choose almost any stock in this sector, but my choice currently would be Facebook (FB). Everyone knows this company. They were the darling (albeit well overpriced) IPO of 2012 and the definition of social networking. Within the last 12 months, prices climbed from 36.02 to a high of 76.74. This impressive 113% explosion is ripe for a correction.
I am happy to be short FB above $75 and will evaluate any close above 76.74 closely. Key prices below 75 are: 72.10, 66.56, 61.85, 55.08, and 44.01.
Industry 3: CATV Systems
I generally consider this company and sector a component of technology; however, Netflix (NFLX) is categorized here. They are considered an Internet Television Network, providing streaming video content. Within the last 12 months, this company has rocketed 93% from 248 to a highest high of 475.87.
I am looking for opportunity above 450 with key prices being: 419, 384, 351, 320, 299, and 248.

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Industry 4: Restaurants
Without hesitation, my choice in this sector is Buffalo Wild Wings (BWLD). From 103.41 to a highest high of 167.36 (62%), these guys appear to be overcooked. They stumbled recently following a poor earnings report hitting a low of 141.12. I am looking at the $150 area for short opportunities with key prices to the downside of: 141.12, 137.28, 130.73, 123.33, 116.50, and 111.94.
Industry 5: Automotive
As much as I appreciate what this company does, no one is immune from a market correction. Tesla Motors (TSLA) had a stellar year with prices ranging from a low of 116.10 to a highest high of 265 (128%). Probable area for a short position is between 240 and 250 with significant areas below being: 214, 200, 177, 165, 138, and 116.
In my next post, I will revisit one of my biggest winners from 2011, “Winning with Volatility” and describe how it can be used now to hedge against a market reversal and then hammer home the gains on the recovery. Subscribe now!