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June Strategy - Sell the Rips & Buy the Dips: Pros

Thursday, 31 May 2012 | 5:37 PM ET

On Thursday, the Fast Money pros were trying to determine the best trading strategy for June after May went down as the worst month of 2012.

The S&P 500 index fell 6.3 percent in May, its largest percentage drop since September.

And the other indexes were worse. The Dow's 6.2 percent drop and Nasdaq's 7.2 percent loss are their largest monthly declines in two years.

Going forward, how should you position? Will the markets get worse or will they bounce?

Word on the Street
Dissecting the day's major business news, including Lions Gate's bounce-back, financials and technology, with the Fast Money traders.

Strategy Session with the Fast Money traders

“I'd sell every rip until the market proves itself,” counsels Keith McCullough. The market has been bouncing around in a range and until a significant development gives either bulls or bears a foothold, McCullough expects that to continue.

Trader Mike Murphy concurs. “In this market look for what’s working – get in and get out. Buy dips and sell rips.”

That strategy, however, involves moving in and out of positions with somewhat aplomb.

If you're a long term investor, you might want to wait before you establish any new positions. Largely, the traders think the path of least resistance is lower.

"I haven't been this negative on the market in a long time," says trader Josh Brown. "In the first week of May I went 100% risk-off."

“I too need to see the market prove itself before I can feel bullish,” adds Steve Grasso. He's worried that the market could be breaking down.

“Looking at sectors of the S&P, rally leaders such as industrials and energy seem to have already broken down," add Joe Terranova. It’s the utility sector that’s doing well.” That says to Terranova the sentiment in the market has become very defensive.




Posted by CNBC's Lee Brodie

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Trader disclosure: On May 31, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Keith McCullough is long XLU; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long PNC; Joe Terranova is long USB; Joe Terranova is long TCBI; Joe Terranova is long SBUX; Joe Terranova is long SJM; Joe Terranova is long UPL; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI; Joe Terranova is long LPX; Joe Terranova is long SNDK; Joe Terranova is long IBM; Joe Terranova is long CNX; Joe Terranova is long LQD; Joe Terranova is short JUNE MINI S&P FUTURES; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA; Mike Murphy is short JPM; Mike Murphy is long TGT, Mike Murphy is long FDX; Jon Najarian is long FB CALL SPREADS; Jon Najarian is long DAL CALL SPREADS; Jon Najarian is long JPM CALL SPREADS; Jon Najarian is long GS CALL SPREADS; Jon Najarian is long VIX CALL SPREADS; Jon Najarian is long CIGX; Jon Najarian is long DDMG; Jon Najarian is long CME; Jon Najarian is long CBOE

For Amelia Bourdeau
No Disclosures

For Scott Kessler
S&P Capital IQ and/or one of its affiliates may have performed services for and received compensation from the subject companies during the past 12 months: FB


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