Stock Trading: Is Profit-Taking Right Around the Corner?
Over the past few days, we’ve been looking into the question of how markets have worked typically after making multiple consecutive closing highs. We pointed interested readers to one of Larry Connors’ less-discussed early books, How Markets Really Work, for some interesting data on how markets have tended to behave in such situtations.
It is important to keep in mind that just because markets have historically tended to underperform after making several closing highs in a row, that does not necessarily mean that a major crash or sharp sell-off is around the corner. And this is especially true for those markets that have remained above their 200-day moving averages. It could mean markets that will trade sideways or markets that only pullback briefly, never becoming significantly oversold, before rallying again.
That said, what this data does mean is that traders now have one more tool to help determine when markets are best bought, best sold and best left alone until the market again reveals a significant edge.
For more on how to find quantified edges in the stock market every day, click here to download a free copy of Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs.
Here are 7 Stocks You Need to Know for Wednesday
Energy stocks were among those most sought after by traders to start the week. Up more than 2% were shares of ^NOV^, while stocks like ^APC^ and ^HAL^ gained well over 1%.
Shares of ^NFLX^ rallied by more than 8% on Tuesday, the stock soaring to its highest levels of the year and closing up for a second day in a row.
Many of the must-own stocks like ^GOOG^, ^AAPL^, and ^AMZN^ made significant gains ahead of trading on Wednesday.
Shares of Google, for example, continue to climb higher below the 200-day moving average. The stock has gained for six consecutive trading days and is very overbought. Also higher for six straight sessions, albeit above the 200-day, are shares of Amazon.com.
And closing higher for a third day in a row and up well over 1% were shares of Apple. Apple had traded below its 200-day moving average for several days in mid-June, and is now at its highest closing level since early May.
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David Penn is Editor in Chief of TradingMarkets.com