Good Times Ahead?
The market is rallying in an
attempt to post a follow through confirmation day of the rally that began on
July 11 on the Nasdaq, and July 12 on the S&P 500.
It looks like it’s time for us to
approach the overall market as though it may be in rally mode. Sure, it could
fall right back down or it could stage a 50% rally from here…you never
know and that is how it should to be played.
Any potential buy candidates will
still need to be carefully screened and fulfill the fundamental and technical
requirements. One word of caution to note before moving on to the few setups
that I have seen is this: Stocks have been breaking out of bases on very light
volume, thus indicating very little conviction.
Quest Diagnostics
(
DGX |
Quote |
Chart |
News |
PowerRating) pushed
through a pivot point on June 28, but volume was barely above average, not the
40-50% increase successful investors would like to see. Laboratory Corp.
(
LH |
Quote |
Chart |
News |
PowerRating)
broke past its buy point on July 13 with volume that was less than its 50-day
average and it continues to set new highs on lighter and lighter trade.
Lifepoint Hospitals
(
LPNT |
Quote |
Chart |
News |
PowerRating) broke out on July 11 on fair trade, but was
unable to follow through on the breakout until today, again on
less-than-impressive trade volume.
It is never easy to watch a stock such
as LH move up without you, but it is important to remember that our goal is to
buy stocks as they have their greatest chance of success. Usually when
situations such as these occur, they will retrace their gains just as fast as
they post them. It is much better to focus on stocks breaking out correctly.
Recent success stories include Option
Care
(
OPTN |
Quote |
Chart |
News |
PowerRating) and Hotel Reservation
(
ROOM |
Quote |
Chart |
News |
PowerRating). Both stocks broke out on
strong volume and have been able to hold above their pivot points. The market
was not flashing buy signals, so investors who passed on these will definitely
get more opportunities if a bull market is about to emerge. In the meanwhile,
stocks breaking out successfully will help validate the current rally.
American Eagle
(
AEOS |
Quote |
Chart |
News |
PowerRating), Ivax Corp.
(
IVX |
Quote |
Chart |
News |
PowerRating), Meritage Corp
(
MTH |
Quote |
Chart |
News |
PowerRating), Ryland Group
(
RYL |
Quote |
Chart |
News |
PowerRating) and a few other
issues are poised to move higher. Otherwise, there have not been very many
stocks ready to break out. This alone is a reason to wait for further
confirmation of a bull market, or invest very conservatively. In late April,
early May, I was able to come up with at least 50 stocks worth watching and I am
now only able to think of a handful.
Good trading,