When playing momo stocks, the Fast pros always say buy high and sell higher until you get a sign that suggests otherwise. We may have just gotten that sign.
On Tuesday some of the year’s highest fliers such as Chipotle, Salesforce and Ralph Lauren all took a hit.
Although they traded lower as the market sold off broadly, the pros find that somewhat surprising because they would have expected some investors to buy the dips, betting the momentum continues.
“That’s hardly bullish,” says trader Dan Nathan. Also he adds, these and other high fliers are starting to break key technical levels. "In times of uncertainty people watch the technicals," he adds, "and when they break down, investors sell."
“And we’re in the beginning of May,” he adds. “For the past two years it’s been a rocky period,” he says. Nathan sees no reason for this year to be different.
All told, Nathan sees high fliers as a crowded trade.
Trader Stephen Weiss says much the same. “I'd be particularly cautious of any momo stock with big Europe exposure. And historically there is not safety in these kinds of stocks.”
As a value investor, trader Karen Finerman can’t understand why investors were in these stocks in the first place. “How can anyone justify their valuations? There are better places to put money to work.”
