The major indexes paid their 50-DMA’s/65-EMA’s just one day of respect, before they ultimately plummeted well below, on very heavy volume this past Monday. Both the NASDAQ and S&P 500 rallied back powerfully yesterday, although volume declined across the board, which is less than ideal. Nevertheless, yesterday’s action served as day 1 of the rally count for both major indexes.
Now that the market is back in correction, we will be on the lookout for a follow-through day to occur. Ideally, a follow-through day should occur on days 4-7 of a rally attempt, which means this Friday 8/9 is the soonest a follow-through day can happen. In rare instances, a third day follow-through can occur, however, it must be overwhelmingly powerful.
In the meantime, continue to keep track of the strongest stocks in the strongest groups, with the best fundamentals. The first of these stocks to break out when the market follows through, often become some of the most powerful leaders of the ensuing move higher. So, make your lists, set your alerts and wait patiently for the market to follow-through on its current rally attempt.
IMPORTANT: Earnings season is still in full swing, so it is critical to check and recheck when a company is due to report earnings before initiating a position in their stock. These dates can change and often at the last minute, so be careful.
The NASDAQ gapped below its 50-DMA/65-EMA and sold off on heavier volume Monday, but halted its decline well above its 200-DMA and then rallied on lighter volume yesterday, marking day 1 of its rally count.
The Russell 2000 melted below its 200-DMA on heavier volume Monday, which is where it remains, despite yesterday’s rally on lighter volume.
The S&P 500 gapped below its 50-DMA/65-EMA and sold off on heavier volume Monday, but halted its decline well above its 200-DMA and then rallied on lighter volume yesterday, marking day 1 of its rally count.
The DOW broke sharply below its 50-DMA/65-EMA on heavier volume Monday, but found support at its 200-DMA, although it remains well below its 50-DMA/65-EMA, despite yesterday’s rally.
Buy PINS on a big volume move through $35.29, with a sell stop at $32.25. (Price Alert: $35.29)