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pic3_268_25021_528_5757_low1-300x240Stocks took a breather last week, but the move lower by the major indexes was a far cry from what many now say is a long overdue correction.

In fact, the lack of conviction by sellers resulted in stocks almost always closing higher than intraday lows. So far there has been no spark to light the fire that will take some of the steam out of the current rally.

The current environment is a bit of a mind-bender. Most market participants realize that stocks never go up in perpetuity as they seem to be doing of late. There almost always is a pause or some sort of correction. The question is timing.

It is certainly not out of the question to see stocks move higher without pause for longer than many expect. One could even argue that the very expectation of a pause is what keeps the market moving higher.

As I said, reading the tea leaves is a bit of a brain teaser that very few can solve. Those that try usually fail. The result can be lost gains by being overly conservative in your portfolio while the market is rising or buying stocks at the very wrong time when the correction does indeed come.

Therein lies the beauty of buy-and-hold-investing. With buy-and-hold there is no need to solve the riddle of will stocks go up or will they go down. Deploy you capital and sit back and enjoy the ride.

You are likely to be rewarded in the long run.

Shorting stocks likely to disappoint

For those who can’t sit idly by for one reason or another, there are short-term trading opportunities within the long-term trend. Fueling the bullish move of the last several months has been strong economic data. The expectation is that economic growth will fuel profit growth, therefore justifying higher stock prices.

It is a nice little theory that uninterrupted by crisis can push stocks to new heights. Problems arise when actual earnings data does not support those impressive stock gains. When companies release earnings, any black marks in the report can trigger a momentary collapse in the euphoria of bullish investors.

Last week we saw KB Home (KBH) report results that were not enough to support what had been huge run-up in share price. The stock collapsed by more than 10% in the immediate aftermath of the news.

At the same time, there are stocks reporting results that meet expectations, but the gains after such reports have tended to be muted. Therein is the opportunity for astute traders. Shorting stocks likely to disappoint is a strategy that can deliver huge short-term trading profits with limited downside.

I’m sticking to that approach until further notice. Here are five companies reporting results this week to keep an eye on:

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