The market pulled back on Friday, with the major indexes being down around –2%. The pullback was on lower volume, and some profit taking is certainly expected at some point. So Friday’s action offered no reason for panic. But as seen in this chart, the market has been on a steep rally since the lows in early March, and this kind of move is not sustainable for too long.
Although the market was down, there was a trigger from the Watchlist. It was CENTA, which moved fast after triggering, but pulled back to close under the entry point.
Last week was a great week for trading breakouts, and a great week for the Watchlist, as I had many stocks that made nice momentum moves. This is why it’s important to keep a Watchlist, even if you don’t plan to trade, at least have some ideas ready. A question everyone is asking now is, was March the bottom of this bear market? I have been reading about some interesting comparisons of this market to the bear market of 1937-1938. The comparison uses Elliot Wave Theory, which would call for a small correction to be followed by a strong and sustained up-move in the market. If the comparison continues, a lower low would eventually be made, which would then be followed by a substantial bull market rally. You can read about this analysis at Amateur-Investor.net. A comparison is also mentioned here.
We are in an IBD Confirmed Rally, which means Investors Business Daily has some stocks, which they have highlighted in their Monday edition as being near their buy points. Those stocks are: APEI, PNRA, ALGT, MYGN
Although Friday’s action could be seen as a bullish “pause to refresh”, we are likely to see correction soon. These are a few charts I will be watching for short term trades.
Good luck and good trading!
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