Big tech took the hit today: the Nasdaq 100 fell 3.5% while the average S&P 500 stock lost less than 1%. Cisco dropped almost 4% with it, and I would rather buy it a little lower, so the order sits just under Friday's close and only fills if the selling carries into Monday.
Cisco is the largest maker of networking equipment. CSCO pulled back hard inside a longer uptrend. Monday's free trade is a buy limit at $103.47, with the stop and exit written out below. Technology fell the most of the sectors on Friday.
What caught my eye on Friday
Since October 7 the Nasdaq 100 is down 9% while the average S&P 500 stock is up 4%.
The monthly candle of the average large cap stock still looks pretty good.
I expected the VIX to be higher.
Monday's free trade: CSCO
Buy limit $103.47, day order
Stop: after a close beneath $94.78, sell at the next open
Exit: a close above the prior day's high sells it at the next open
Time exit: sell at the open Thu Nov 19
The stop is not an order you place: only a close beneath $94.78 counts. It assumes a fill at the limit; a lower fill lowers it by the same amount. Whichever exit comes first closes the trade.
How Mean Reversion works
The most-watched names in the market get defended. This system buys a hard pullback in a leader that is still in a healthy longer-term uptrend, with a buy limit just under the close. Out within days.
One thing worth knowing
When this trade works, it usually works fast. In our 26-year test, Mean Reversion trades that ended within two days won 95% of the time and made +4.80% on average. Trades that lasted four days or longer won about half the time and lost 0.50% on average.
Would you take this one? Hit reply and tell me how you'd play it. I read every reply.
November's free investment: LLY
Once a month I also rebalance my investing portfolio. It holds 19 positions this month, with 10% in cash, and only changes at the start of each month.
The data picks the names and I place the orders. Half the money goes into momentum and strength stocks, and the other half into a global ETF rotation.
Eli Lilly and Co (LLY) sits in the Momentum Stocks group this month.
Place it before Monday's open, Nov 2. For your broker:
Buy at the open: market order, day order
Size: 5% of your investing account
Exit: sell at the open Tue Dec 1. Members see whether it stays for December.
Stop: none. The monthly rebalance is the only exit
On a $10,000 investing account, 5% is $500. LLY was about $1,417.54 a share when the orders were sized, so $500 buys no whole share. One share at 5% needs about $28,400 in the account.
I give away one name from the portfolio each month. Members get the other 18 below, each with its weight, plus the cash slot and the names to sell at Monday's open.
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Below the line: 16 more swing trades and 43 day-trade setups for Monday, with the exact entry, stop and exit for each, plus the stops and exits on our 6 open positions.