MLR - PMP 2/19/15

Published : February 9 2015 at 9:27 ET

Major averages did an about face on Friday to close in the red on mixed volume as they continue to trade in a sloppy trading range that started in December. Little headway has been made in market timing with ETFs as a consequence of the market environment. The Market Direction Model remains in cash. This morning futures are down sharply on news of more "Grexit" issues, underpinning the choppy, often unpredictable nature of the market these days.

LinkedIn (LNKD) gapped up on a strong earnings report then closed near the low of its range. The closer one buys to the low of the trading range, the lower the risk since one's sell stop is presumably no more than 2-3% below the low of the trading range. The caveat is that a stock that closes in the lower half shows hesitation and weakness. That said, LNKD's lower half close was in keeping with the weakness of the general markets. Thus one could attempt to buy a position knowing their risk is mitigated since one would allow no more than a 2-3% undercut of its Friday low. On the other hand, one may wish to avoid it altogether since it didn't very well buck the general market weakness. Such choices can be challenging to an investor who must then weigh whether LNKD would hit its sell stop despite its initial strong gap up on earnings, especially should the market remain directionless.

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