These Stocks Will Kill in a Bull Market

A lot of people told me recently that I should be going long Schering-Plough (SGP - commentary - Cramer's Take), as it is a favorite among a lot of professional investors that I know. This was back in December, and after taking one look at that chart, I knew the last thing I wanted to be was long a stock in a nasty downtrend.

Schering-Plough (1/14)

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Source: TeleChart Gold

When the stock broke down away from the 50-day moving average on Jan. 14, I went short SGP and was quickly attacked for going short such a "clear long."

Well, here we are more than two months later, and the stock is now down 42% with many pundits still recommending this stock.

Schering-Plough

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Source: TeleChart Gold

This stock is still dangerous, and there is no way anyone should be going long a stock with this much resistance ahead of it; it could take years to get back to the old high. I have already covered 80% of my short but will let the rest ride until it closes above the 50-day moving average.

Yamana Gold

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Source: TeleChart Gold

A similar stock in the same situation that people are telling me to buy is a stock I just cut -- Yamana Gold (AUY - commentary - Cramer's Take). Now, while I was just recently long AUY, that trade has completely changed because the institutional money is clearly dumping this stock (circles in chart).

There is no way, with this much red on the chart, that anyone should be going long this stock.

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Below are some of the stocks that I would like to get long or add to my existing position in after Tuesday's powerful yet below-average-volume move.

Open Text

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Source: TeleChart Gold

Open Text (OTEX - commentary - Cramer's Take) has been under a lot of accumulation (circles in the chart) since late August. If it can break out to a new all-time high on huge volume, or pullback to the 50-day moving average and then bounce off the moving average on strong volume, I would like to get long this computer software-enterprise stock.

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AK Steel

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Source: TeleChart Gold

AK Steel (AKS - commentary - Cramer's Take) is in an extremely strong uptrend and if it pulls back on low volume and bounces on strong volume, I would love to get long this leading steel-producer stock.

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U.S. Steel

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Source: TeleChart Gold

If U.S. Steel (X - commentary - Cramer's Take) can pull back to the 50-day moving average on low volume and then bounce off the moving average on strong volume, I would love to get long this hot chart.

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Intuitive Surgical

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Source: TeleChart Gold

Intuitive Surgical (ISRG - commentary - Cramer's Take) is breaking out of a cup-and-handle pattern on strong volume. I would like to continue to add to my position here or add to it with a low volume pullback to the 50-day moving average followed by a heavy-volume bounce.

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Salesforce.com

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Source: TeleChart Gold

If Salesforce.com (CRM - commentary - Cramer's Take) can either break out to a new high or bounce off the 50-day moving average on very strong volume, I would love to get long this leading computer software-enterprise stock.

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Homex

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Source: TeleChart Gold

If Homex (HXM - commentary - Cramer's Take) can either bounce off the 50-day moving average or break out to a new all-time high on very strong volume, I would love to get long this leading homebuilding-residential stock.

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Priceline.com

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Source: TeleChart Gold

Too bad this breakout is not on stronger volume. If it would have been, I would already be long. However, now I need Priceline.com (PCLN - commentary - Cramer's Take) to pull back on low volume to the 50-day moving average and then bounce off the line on very strong volume before I can get long this leading e-commerce stock.

The great thing about these leading stocks is that they are all set up such that I risk very little if they do not work immediately, because I can cut my entire loss with a close below the 50-day moving average.

If they do work out, the gains that can be produced from leading stocks, in a real bull market -- which I doubt we have here -- will put the bottom-picking, laggard-stock-buying permabulls to shame.

The trend is always your friend, and right now there sure is not a strong trend out there. I'll remain cautious here and let the market prove to me it deserves all my money.

It still is not time to wave the "all-clear" flag; it is a stock-picker's market where cash is king. I do not have to buy the bottom to make a killing in the stock market. I just have to buy the best stocks in the strongest sectors when an uptrend is confirmed. That is the only way to find and hold onto the 300% to 2500% winners.

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At time of publication, Hayes was long Intuitive Surgical and short Schering-Plough.

Joshua "MauiTrader" Hayes is CEO, president and founder of Big Wave Trading LLC, a Maui, Hawaii-based stock market advisory service. Hayes also runs BigWaveTrading.com, an online stock market commentary and stock selection service for short- and intermediate-term investment strategies using CANSLIM and other strategies. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Hayes appreciates your feedback; click here to send him an email.