What Not to Do in a Pullback

Despite what appeared to be panic in certain quarters about Wednesday's selloff, a number of leading stocks I track were holding near their 10-week moving averages. Certainly, the downside action offered a signal for investors and swing traders to pocket some profits after the run-up in recent months -- and I am not dismissing the possibility of a real correction at this point. A pause to consolidate would not be surprising following the market's strong-up in recent months. After all, the days of heavy-volume selling on the major indices have been gradually piling up, and that type of action is historically a precursor of market tops.

However, as in any correction, the performance of market leaders will be key. As of Wednesday afternoon, many of the best price performers from the recent rally -- Apple (AAPL), Priceline (PCLN) and Lululemon (LULU) among them -- still sported healthy charts. In some of these cases, investors may consider selling to keep their gains, but in every market pullback I see people writing off strong stocks just because they've retreated from highs....601 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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