Price Headley Tells CNBC It's Time for a Little Profit-Taking

Posted by jbrumley on May 22, 2017 11:17 AM

This weekend, the White House unveiled a deal that will facilitate the sale of $350 billion worth of arms and defense equipment to Saudi Arabia and other Middle East U.S. allies over the course of the next ten years.

The news is clearly good for defense names like Lockheed Martin (LMT) and General Dynamics (GD), but also bodes well companies like Exxon-Mobil (XOM) that benefit from good trade relations and a stronger global economy. Monday's subsequent pop from the stock market, however, isn't necessarily a reason to step into new long-term positions.

That's the assessment BigTtrends founder and President Price Headley offered to CNBC' s Akiko Fujita -- one of The Rundown's hosts -- this weekend anyway, explaining "I'm more of a zigging-when-others-zag kind of guy in this market right now. I think you have to be ready to buy dip but you also have to be ready to take some profits on names when they get those initial pops even though the news sounds like a longer-term benefit. My view would be, in this market I would be cashing in on any of Monday's pops rather than trying to buy them and hold them."

That's not always the case, concedes Headley. But, unusual circumstances call for an adaptation of your strategy. The Bigrends chief analyst went on to say "I think buying and holding right now has become very tricky. And we saw it this past week. When Wednesday hit the Dow was down 370 points. Everybody was talking about the possibilities of a Trump impeachment. Those were definite extremes in fear, and then the next two days the market gains that back. I was buying that fear on Wednesday's close, and I was cashing some of my chips in on Friday. I think  that's the zig-zag theme. It's a trader's market, and I think you'll want to do the same on this good news come Monday morning on those other names."

As for the names Price Headley is particularly targeting, "I'm taking some profits in tech [technology stocks], for the most part. I still own Microsoft (MSFT) is the best value tech stock out there with a ton of cash. But, I have taken some Apple (AAPL) profits. I've taken some Facebook (FB) profits. I've taken some stuff off the table that we've talked about in prior months. Tech was a leader, but I think it's extended."

It's not just technology stocks, however. Several European plays and emerging markets names have doled out similarly oversized rallies, and now call for similar profit taking.

"I was in the iShares MSCI Emerging Markets Index ETF (EEM) and some of those kinds of names that had run up too much, and are now due for a little bit of consolidation and profit-taking," Headley stated. "I'm not saying go bearish on them by any means, but I think it's time for rotation. That's going to become another key buzzword in this market -- where do you rotate into?"

Rotation refers to the flow of money from one sector to another, from one region to another, and even from one style or instrument (stocks versus bonds, for example).

Headley observed "For a while drug stocks and biotech stocks were left for dead as investors thought Hillary Clinton would become President and put big price controls in there. Instead, with Donald Trump as President he met with a lot of the big drug and biotech-related CEOs, and the sector's been gangbusters to the upside ever since. Those fears of big price controls don't look like they're going to happen. So, I've been buying the iShares NASDAQ Biotechnology Index ETF (IBB) this past week on its dip. That's a sector positioned to keep getting some new money-flow back into it, as rotation comes out of some of the prior leaders like tech."

To see the entire video clip, visit the CNBC site here.

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