Major stock averages staged another solid little rally on the session with the Russell 2000 leading the way once again. Volume was higher across the board adding some muscle to the overall move. However, for the second day in a row stocks stalled out mid day to close off their highs. This is more than likely a byproduct of a market that is very overbought on the short term and starting to get overbought on the intermediate term. The market can definitely continue to rally under overbought conditions but it would be very healthy if we could consolidate this most recent extreme v-shaped move sooner than later.
Whenever the pullback does start it does appear based on this post Brexit move higher that any pullback will be perceived by the overall market as a buying opportunity. I am starting to see some stocks that are not yet hitting new highs starting to form the right side of consolidation patterns. While the accumulation/distribution is still skewed negatively if the market does decide to pullback and then rally higher some nice patterns could emerge. Right now there are not a lot of these but at least I can see many starting to form right sides of consolidation patterns.
While I do not have any new long positions this evening in high quality names I did get two oversold long signals in very speculative low priced names. I am going to continue to execute this methodology but only give out the names in the chat room as it is still being tested before significant capital is put to work using this methodology. EOD trend following is not quite lined up yet as there are not a lot of “beautiful” looking patterns out there longer term. But the intraday opportunities and low priced oversold plays continue to develop and work.
Two stocks developed well also on an EOD trend following basis with DLA and SSTK now up 20%+ from their original purchase area. Until everything is lined up with new long positions working immediately (like SSTK did) in numerous names and the market trending higher on huge volume I am going to take profits in stocks that make short-term extended moves in a short period of time. Especially if they are up over 20%. It’s just been proven over and over since 2013 that this is the prudent profit taking rule to follow until the market really proves itself. So far it has not. There are a lot of issues as I have discussed previously with this current rally in the overall market.
I am going to wrap this up here but I go into my trending/momentum oscillators a little bit more in the video lesson below. Have a great evening and I will see you on Wednesday. Aloha.
