Over the last three weeks Sun Pharmaceuticals has been doing its best Deutsche Bank impression, losing roughly a third of its value and trading at levels not seen since March 2013.

As the largest component of the Nifty Pharmaceuticals Index this performance has been a major drag on the index, however, equally-weighted charts can offer us a much better read of the sector's health.

This post is a continuation of our "Free Chart of The Week", which focused on the use of an equally-weighted Pharmaceuticals Index to make the case that the sector is in better health than the cap-weighted index suggests.

In this post, we'll use that information to identify the stocks in this sector offering us the best reward/risk opportunities.

This past weekend we got new Monthly Charts, and overall the themes we discussed last month are very similar. With that being said, we'll use this post to discuss a few notable developments.

I've seen way too much at this point to underestimate what the market is capable of doing. People call me all the time and say, "JC crazy market huh?" or "Did you see that crazy move in XYZ". Yea I saw it. So what? As Jay-Z said in his latest album,

if everybody's crazy, you're the one that's insane". 

How high can a stock go? Much higher than you think. How low can a stock go? Zero. How low can your account go? In the negatives where you actually owe money. That's the deal we make when we enter the marketplace.

So there is being overly dramatic and there is being realistic. We've seen these clowns calling for market crashes since a month after the last one was over. They prey on vulnerable hard working citizens preaching the end of the world and they make a ton of money doing it. They're terrible people.

It's my job as a market participant to identify the risk that is on the table at any given time. Until just recently, the risk in U.S. Stocks had been higher for years. Not being aggressively long, was the real risk in my opinion. All of that...

You hear it all the time, "Cash is King". But we forget that it really can be. Not all the time, very few times in fact, but cash does serve a great purpose.

There are a lot of institutions that are not allowed to go to cash, as part of their mandate. The majority of investors, however, do have that option. Why not use it?

You're going to see a lot of the passive investing community advise against cash. "Market sell-offs are an opportunity to buy more at lower levels", they say. "You're not disciplined or smart enough to get back in", they preach. "Just buy and hold and everything will be ok". It's all based off this theory that the market always goes up. I guess if you trust data based off the tiny sample sizes that we have, you'll believe anything.

From the desk of Tom Bruni @BruniCharting

Crude Oil is down roughly 35% over the last two months as record bullish sentiment unwound and prices fell in what was essentially a straight line. There hasn't been any reason to bottom-fish this market, but today we received our first indication that a short-term bottom may be in.

It's a market of stocks, after all. The indexes are one thing, but the components that drive them are another. Last week we laid out a list of the stocks we wanted to be buying for a December rally. The idea was to get involved with stocks already working, rather than trying to get cute and bottom fish the underperformers.

We'll see how that works out. In the meantime, let's take a look at market breadth.

Whenever in doubt, zoom out. Monthly charts are a great way to do that. On November 30th we got new daily, weekly and monthly candles. This is a lot of new data that we have to work with.

Here is what I'm seeing out there:

The stock market has spoken and it seems clear that we’re stuck in between some pretty significant levels of support and resistance. This argues for more of a sideways mess type of a market vs a complete collapse, at least for now.

We’ve laid out some important prices where something more substantial would be possible. We’ve successfully held above those key prices. A few examples are Technology $XLK above the 2000 highs, Regional Banks $KRE & Broker Dealers $IAI above their respective 2007 highs. In the indexes, 2660 in the S&P500 is a big one. We’re not going to have a complete collapse if these assets are above those levels. It’s if and when we’re below them that the real problems could start.

All of this suggests that we’re in more of a sideways range type market, at least for now. In that environment, if we’re going to buy stocks, we want to buy strength. I don’t think it’s worth messing around looking for mean reversions. We want to buy what has already been working compared to the rest during the past 2 months of selling pressure.

It's the holiday season here in America and stocks are in a downtrend, or sideways trend at best. What does that mean for us as investors?

During our members-only conference call and our trade management post we discussed why a more neutral approach is best as we identify whether equities are going to consolidate at higher levels or begin to roll over again. We also discussed the importance of taking some profits quickly in an environment that produces whipsaws in both directions.

Over the last two weeks we've seen a number of our long ideas failing and more of our short ideas working, suggesting that lower prices are likely ahead in the short-term and that we should continue to err on the short side of stocks. This post will outline some of the evidence we're seeing supporting this thesis, as well as adding a number of short ideas to our trade list from October and November.

I'm on the east coast this week for the Thanksgiving holiday so I came into the city to say hi to friends. Catherine Murray and I had a nice conversation on BNN Bloomberg about US Stocks, Interest Rates and what Credit Spreads are suggesting for overall risk appetite from institutions.

Here is the video in full: