MLR - PMP 10/24/13

Published : October 24 2013 at 9:22 ET

Major averages were off on mixed volume with all of the indexes logging a distribution day despite closing well off of their intra-day low. Investor sentiment was also hit by worries about possible monetary constrictions in China and softness among European banks. China let money market rates float sharply higher to cool inflation and the hot real estate market. The market has come up sharply from its early October lows and is entitled to some consolidation, although investors should remain aware of the action in leading stocks, some of which have been hit hard as of late, including Netflix' (NFLX) colossal high-volume reversal on Tuesday.

Tesla (TSLA) closed below its 50-day moving average for the first time since it launched in April. Should it trade below the low of Wednesday's close, it would be a violation and a sell signal. That said, if you already sold, that is understandable given that the stock has had a massive upside move and may be ready to form a deeper base before it is ready to continue its uptrend.

Invensense (INVN) is nearing its 50-day moving average once again. It has yet to violate it since it gapped up on a strong earnings report in May. Its story is unique and sound so the intrepid may want to add to their existing positions as it trades around its 50-day as long as no violation occurs. A violation occurs when a stock closes below the low of its moving average then trades below the low on subsequent days. Buying strength in INVN has not proven to be a sound strategy with this particular stock, so a pullback to the 50-day line might offer a lower-risk approach that is more appropriate to this specific stock.

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