We have gone from “lean back” to “steady advance,” and now we will quickly examine how hard the mighty can fall.

Lone Star Technologies (LSS) made a “stealth warning” late Friday. This hot performer seemed poised to challenge 3+ year highs just a minute ago, and now analysts are climbing all over each other to downgrade this latest dawg.

I will not go into all the dirty details on this one. I really just want to use LSS as an example of a “dangerous” 52-week high performer. This example counter-balances the compliments I have showered earlier on various stocks that have recently popped 52-week highs. All looked well on this one. The trend was a friend, the wind was blowing from behind…heck, the company even plays in the hot oil patch. Yet, one quick look at what insiders thought of this stock probably would have had even the most bullish oilman running for a retirement ranch in Oklahoma.

Yep, you guessed it. Insiders have been selling this dawg hand-over-fist! Incredibly, insiders have unloaded over 90%, yep, NINETY PERCENT, of their holdings over the last 6 months. Now, why the big boys continued buying this one, I have no clue. But this dynamic set up one of those ugly divergences that almost always ends up bloody. When the boom finally drops that the insiders are scrambling to escape, the big boys unleash their selling power with an unrelenting fury (for example, just look at the intra-day chart!). Big boy buy-in is a blessing when all is well: it provides excellent support on the minor dips that happen from time-to-time. But this sponsorship is a wretched curse when things look bad - after all, retail investors like you and I are the only true believers in buy-and-hold (=gasp=!). No offense to Mr. Buffet and his loyal fans of course.

My opinion now? Well, the warning was bad, but not all that bad. There is now talk of a cyclical peak. I don’t really know given I have no expertise in this area (although I HAVE watched and “played” with LSS for many years, including today), and calling tops is hazardous to one’s health. Besides, I do not dare pollute Mike’s site with any more fundie talk. But you can expect that the latest drama on this one is only just beginning. LSS is now 4 points below the 50DMA, the 200DMA is still about 6 points away, and earnings are announced at the end of October’s options expiration week. For more fun, see the sympathy tumble in MVK.

Be careful out there!