Here’s What Five Distribution Days In July Might Mean…
The market has spoken — and for the time being, it has said
to avoid buying stock for now! We have seen the S&P
500 post five distribution days between
7/09 and 7/29. This is enough evidence to point to lower prices. On a
positive note, the leading Nasdaq index
has managed to curb selling pressure over the same period.
Fortunately, things do not
seem as bad as they appear. Leading stocks have taken nice shots below their
50-day moving averages, as in the case of Ebay
(
EBAY |
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PowerRating).
The fact is that we had a
great move and very solid profitable trading since mid-March and this
correction may very well be what the market needs before moving even
higher. It is definitely giving growth stocks a chance to form new base
patterns from which to move higher. Boston
Scientific
(
BSX |
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PowerRating) is a prime example. It has formed a flat base
with a pivot point around 65.83. The Medical products company has been growing
earnings for five straight quarters in addition to other quality fundamental
traits.
If the market gives us a
solid rally on very heavy volume, stocks such as BSX and other like
Ameritrade
(
AMTD |
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PowerRating) and
Yahoo!
(
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PowerRating) may surge higher
without looking back.
We would also like to see
stocks surge through resistance on a consistent basis. This occurred all
spring as the market’s rally began, and has been recently represented by
Spectralink
(
SLNK |
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PowerRating). The stock pushed
through its pivot of 17.30 on heavy volume and is still holding above.
Patience is almost always
rewarded in the stock market and right now may be no different. In my analysis
for True Capital Management, LLC, I am currently looking heavily into the
markets’ price and volume action and new bases from recent winners. Until
things firm up and move higher, the sidelines are a nice place to watch
from. If more trouble appears, then the short side may be worth looking
into. For now, we will follow the recent action and wait for the market to
flash some blatant buy or sell signals.
For anyone who is not familiar with a pivot point: It is the point on a stock
that is 10 cents above a major price consolidation lasting at least 7 weeks.
Until Thursday,