Recovery Participants Need Exit Protection

By Chuck LeBeau, director of analytics at www.SmartStops.net.

The broad market has staged a substantial rally from recent lows, but investors need to keep their guard up and their protective exits in place.

Now is the time to be vigilant rather than complacent as the recent gains may only be temporary. Enjoy the recovery and hope that the worst is over, but don't be caught napping if the market suddenly heads south again.

Here are a few popular examples of stocks that have participated in the recovery and how these recent gains might be protected.

Amazon(AMZN Quote). As recently as December 2008 shares of Amazon traded below $35. Now the shares are above $80 and appear to be headed even higher. First-quarter earnings were up 24%, and the online retailing business appears to be improving as worried consumers shop more carefully.

The SmartStops.net analysis has adjusted the daily trailing stops to let profits run and to avoid the potential for "whipsaw" in this volatile market environment. Amazon appears to be climbing well above the current SmartStops exit warning that would occur if the stock declines to $73.80 or lower.

Best Buy(BBY Quote). Discount retailer Best Buy has not fared nearly as well as its online rival, and its first-quarter earnings declined more than 20%. However, the shares have managed to recover from a March low of $23.97 to an April high of $42.06, but prices have stalled just above the $38 level and the uptrend may be in question. The SmartStops exit alert is currently at $35.87.