Look For Bull Market Confirmation
After
Tuesday’s reversal, I caught some slack from some readers because
the column was obviously written by me when the market was up, and then it
closed down. This column is written to capture the essence of the market since
my last writing, not what happened in the last hour or two. My primary goal is
to state, from my perspective, what is going on in the market from an
intermediate-term point.
The quickest things can force me to alter my view is a matter of days, which is
why the column is posted on Tuesdays and Thursdays of each week. Even though
Tuesday was a distribution day and I did not address that in the column, I would
not have changed anything because it takes more than one day to make a market. I
want to share my view with you as often as it takes, to let you know how I am
either making money in the market or how I
am staying out of trouble.
Despite Tuesday’s reversal, the
market came up shining on Wednesday with a positive heavy-volume day in the
major averages.
Once we received our follow-through
day, our objective was to go and find leading stocks breaking out of solid
bases. The only thing that can stop us from this pursuit is if new evidence
comes in that the overall market is under distribution. One day is not enough
evidence to prove this. It would take four days of distribution in 10 trading
days or five days of distribution in 15 trading days to change my view that the
market is under accumulation.
As I look around the market, I am
starting to see some stocks that have pushed through their pivots and traded
higher.
Doral
Financial
(
DORL |
Quote |
Chart |
News |
PowerRating) is the first one that comes to mind.
Charles River
(
CRL |
Quote |
Chart |
News |
PowerRating) broke through its pivot on 8/9, but volume has been
lackluster ever since.
Amsurg
(
AMSG |
Quote |
Chart |
News |
PowerRating) broke through its pivot point on 8/12 and is now consolidating above
that point on lighter trade. This is exactly how a breakout should act. They
move higher, then consolidate, then move higher, and then consolidate, almost
like building a set of stairs.
As I have mentioned in past columns,
each day the market builds on its current rally is another day that stocks have
to build or complete their bases. Well, that has been happening and a few stocks
are even breaking out as I write this.
Some of the names I have been watching
break out are Corinthian Colleges
(
COCO |
Quote |
Chart |
News |
PowerRating),
Apollo Group
(
APOL |
Quote |
Chart |
News |
PowerRating) and Career
Education Group
(
CECO |
Quote |
Chart |
News |
PowerRating). Notice how these all come from the same
industry group.
In the same group as AMSG, Lincare
Holdings
(
LNCR |
Quote |
Chart |
News |
PowerRating) is attempting a move through its pivot of 33.12
on above-average trade.
Whether or not these moves succeed
remains to be seen. The last day on which we had multiple breakouts was in March
and it marked the top of the market right around March 19. If these and other
stocks are able to continue higher, they will provide the much-needed leadership
the market has been unable to find over the past couple of years. If not, it is
important to honor thy stop and cut losses very short so they do not hurt an
account.
Similar to the past two weeks, as the
market holds firm, more and more stocks will attempt to set up and break out. It
will be important to monitor this action because the success or failure of
individual names is the ultimate confirmation of a new Bull Market. It will be
equally important to watch the overall market. We need to look for signs of
strength or weakness. Are we seeing strong closes each day? Are we rising on
heavier volume and falling on lighter volume?
These are all questions to answer by
closely monitoring the trading action at the end of each day.
Have a great weekend,
Â