When markets rally strongly almost everything goes up with them. That has certainly been the case with this current rally. Over 90% of stocks in the S&P 500 Index are above both their 50 and 200 day moving averages. So if you’ve been making long trades you probably feel like a genius. Of the stocks well follow and trade with Twitter sentiment almost every long trade with the trend over the last two months is in positive territory. This is what happens in fast moving up trends so we’re not patting ourselves on the back. We know that a pull back will happen eventually and the success of our trade signals will eventually be tested by lower prices. Today’s price action in the major indexes hints that we might finally be getting the price reversal that many bears have been waiting for. With that in mind we thought it would be a good time to show some of the long trades that we’ve mentioned on Twitter @DownsideHedge over the past
Above are the stocks with the most Bullish Twitter Intensity over the past week. Below are the monthly numbers.
Exxon Mobile is fairly characteristic of how people feel about energy and oil stocks recently. Our Twitter Sentiment Indicator for XOM has been reaching extreme levels. The last time we saw readings near or above .80 it turned out to be an initiation thrust that helped push the stock to new highs. In fact, the move not only broke several months of recent consolidation, but was strong enough to also clear the early 2011 highs. Sentiment on Twitter for oil stocks like XOM have shown high readings as the stocks are seeing new highs. It looks like the extreme sentiment may indicate the stocks are oversold. Our smoothed indicator is rolling over which may be signaling XOM is ready to consolidate the move through the 86 level. A correction back to the 84-86 level would be healthy as it will allow sentiment to clear its overbought condition. It will also provide money managers and traders alike an opportunity to buy at a low risk entry point and a small discount.