Here's hoping a good correction unleashes value stocks

By Jesse Barkasy

When will a cleansing stock market correction arrive? That is the burning question. We have had a virtually straight up pattern for months without enabling many stocks to form the chart patterns needed for strong breakouts–and we would like some better entry points before taking some new trading and investing positions.

It does not matter that conditions are perfect for the markets to rise. It only matters that some stocks correct to form solid bases where big fund investors can buy with confidence. I see many stocks in correction mode even as the market averages have risen with a few small pullbacks.

At some point we do feel a much deeper correction will show in the averages. Some of the larger names that have had nice run ups such as Ford (F), General Motors (GM), Delta Airlines (DAL) and Micron (MU) are starting to break away from this straight up pattern. I hope this becomes a healthy correction although I'm ready for a strong sell off and a new bear market potentially as well.

Some of the stocks I'm watching besides the ones I have mentioned above are American Airlines (AAL), Agco (AGCO), Aircastle (AYR), Hilton (HLT), Novavax (NVAX), Questcor (QCOR), SunPowr (SPWR), Canadian Solar (CSIQ), SunCoke (SXCP) and 58.com (WUBA).

The choppiness of specific stocks we traded has handed me some losses this month and we are adjusting accordingly.

The downturn in many oil and energy related stocks has gotten my attention lately. The move was swift and hard and some of the short term downtrends remain intact to this day. For example, ConocoPhillips (COP), National Oilwell Varco (NOV) and Market Vectors Oil Services (OIH) are now on short term downtrends even as Exxon Mobile (XOM) hits new highs? Gold and Silver remain flat to down and we await a trend change in this sector.

We are waiting to see if any negative implications start to surface more clearly from the decision by the U.S. Federal Reserve to start tapering its monthly bond purchases. Some problems in our view include keeping many companies in business that should have gone under thus creating an over abundance of businesses and producers in certain sectors.

DISCLAIMER: The investments discussed are held in client accounts as of November 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Jesse Barkasy

Jesse Barkasy

I have worked as a professional trader for 13 years. I use charts and sentiment measures to guide my trading

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