Here’s A Good List To Keep Handy
The market showed mild
distribution as the indices closed slightly lower on heavier volume than
yesterday.
We seem to be wading through a correction for the rally
that has been underway for a couple of months. It can do one of two things from here: roll over and resume the bear
market, or push to new highs eventually. Recent evidence points to the latter and that is exactly what I would
recommend following. Don’t get
me wrong, it is more important now than ever to purchase and hold stocks with
a strict set of rules in place along with carefully placed stop levels, but I
really wouldn’t change anything else.
I am turning to recent breakouts and market leaders for
indications of this rally, and they are getting hit just like the market, but
nothing too severe has unfolded. It
isn’t very easy to find a stock that is well below its major resistance after
breaking out. The worst-case
scenario I have seen is in stocks like University of Phoenix
(UOPX) or J2
Global (JCOM). UOPX hasn’t made
much headway since its move above 40.
JCOM spent some time undercutting its 50-day moving
average on heavy volume before bursting higher.
A stock like Hi Tech (HITK) doesn’t really worry me
yet. After its double from about
20 to 40, a nice retracement will probably eventually propel it higher.
Unless we start to see the market come under more
distribution, this appears to be a very healthy pullback. It is a good idea to keep a list of
top performers handy for when this
ends. Another sign of market
strength we will have is when the market rallies out of this pullback. Look out for a move up accompanied by heavy volume, which would
represent good strength and further institutional accumulation.
Until Thursday,