Don’t Leave Home Without It

Almost 6 months ago to the day I wrote about the US broad market struggling going sideways but when looking under the hood a lot of stocks forming major topping patterns. I provided a couple of examples, one being American Express, AXP. Of the two, it was the one I felt least comfortable throwing out there because of the magnitude of the loss the pattern was projecting. As you can see in my original chart below, the first target (labeled as T1) was some ~25% below and the second (T2) was ~35%. Without the markets crashing and burning there was no way I felt either of those targets were realistic. I went ahead with the post anyway because all I am is the messenger.

Pleasanton Financial Advisor CFP fee only independent retirement polanner AXP 7-27-15 #1

Fast forward to today and even though the markets have not yet crashed and burned (a couple of manageable 10-11% corrections … so far) American Express has not only met my first target (T1) but is well on its way to the second (T2). And looking at the magnitude and voracity of the decline it looks like T2 may not be the end of its fall and a retest of the 40 level looks very possible. That would be a 50% haircut from the date of my original warning post if that were to occur. 

Bay area fee only independent financial advisor investment adivsor cfp, pleasanton

Congratulations for those who followed along.  You are up a cool 30% in six months. Not a bad annualized return. The further it falls, the greater the risk of a reversal so while I am not making a recommendation, I would ensure I had my exit plan mapped out.  One element of it should be to consider booking some or all profits at T2 and let the balance, if any, ride with a tight stop seeing if 40 is in the cards.