As Sears Holdings was gapping up yesterday and rising, institutions were dumping their holdings. And they are continuing to do so today as SHLD shows no signs of letting up:
Blue and red arrows indicate institutional buying and selling. Source: Thomson.
The strong relative strength of SHLD reminds me of Google in October 2005. As the wider market was careening downhill and all metrics were pointing to a very significant market bottom, GOOG gapped up and zoomed higher. It was among the strongest, if not the strongest stock in the market.
Notice how GOOG’s pullback in October was shallow, not even reaching the August 2005 lows. This is why it pays to keep an eye on the relative strength of a stock.
A similar situation came up in Starbucks this February. As the market was meandering, SBUX gapped up with huge volume and hardly looked back:
I’m not sure if GOOG or SBUX had to climb a wall of institutional selling. In fact, I think it was the opposite. But it the fact that SHLD has such high relative strength gives me enough reason to watch it closely.
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