On Pullbacks, Look At This Group

  • July 13, 2005
  • Rob Hanna

The
market continues to forge higher, but momentum is slowing.  As
certain areas approach resistance (S&P 500) and others get over-extended
(Semis), it is looking like the market is getting ready to pull back.  Rather
than aggressively looking to buy breakouts over the next few days, you may be
better off monitoring those stocks that have already broken out and look to
purchase them on a pullback. 

 

As far as pullbacks go, my
favorite pullback to trade is the 1st pullback after a breakout.  The
risk/reward offered on these is far superior to pullbacks of stocks that are
already in well established uptrends.  The reason the risk/reward is so good is
the home run potential of these setups.  They offer you the opportunity to climb
aboard a strong move very close to the beginning of the move, rather than
somewhere in the middle or near the top.  The value of this extra upside
potential is huge, and should not be ignored.  When considering potential
pullback candidates to purchase, I would almost always lean towards buying one
that is experiencing its 1st pullback from a breakout of a basing
formation.  They offer the biggest bang.

 

Sector Action

As I alluded to above, the
strongest area by far recently has been semiconductors.  They have closed higher
8 days in a row and are 9.33% higher over that time period.  That is quite a
move.  You should look very carefully at this group for opportunities once they
pull back.

 

Good trading,

Rob

 


RobHanna@comcast.net

 

P.S.

Click here for the Hanna ETF Money Flow System.

 

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