The Right Kind of Pullback
Pullbacks are a great way to trade
strongly trending stocks. Instead
of blindly jumping in, waiting for the stock to pull back can provide you with
an optimal entry point. So how do you
identify an “optimal†pullback? First
off, Level 3 Communications
(
LLL |
Quote |
Chart |
News |
PowerRating) has a high three-month relative strength
of 80 and it has a high ADX of 41. Therefore,
you know that it is a high-performing and strongly trending stock.
Next, the stock pulls back to the 38.2% retracement level.
The 38.2% retracement level is a common and widely looked at retracement
level. Lastly,
(
LLL |
Quote |
Chart |
News |
PowerRating) was stopped shy
of its 20-day moving average, which is another common place for a stock to pull
back to. Of course, stocks don’t always
pull back, but remember that boarding a moving vehicle can be hazardous to your
health.