Stocks have performed admirably since the Thursday/Friday selling climax, Tuesday's sizable down day notwithstanding. All the more so in light of the S&P 500's fastest 10% correction ever.
For those tracking the O'Neil follow-through day count, we are considering Friday to be Day 1, since it was the first day up. Today, then, was Day 4 which had the requisite minimum 1.25% price gain, but did not occur on increased volume from the day before. At that, however, today's volume was 36% above average which shows commitment by large investors.
Unfortunately, because the averages have bounced straight up from their Friday lows, we have most growth stock leaders doing the same thing. This takes the form of v-shaped patterns of two weeks or so. These are higher-risk patterns and are usually best to avoid.
The last time such a situation occurred was in 2019. I abstained from putting such v-shaped names on the Focus List. After breaking out to new highs and following through for a few days, most of these issues then reversed and returned to inside their bases.
As a result, currently there are only two names worthy of our consideration. These should be treated as test or pilot buys, meaning one should use a measured position (less size than normal) to see if they can gain traction.
Otherwise, for the rest of us, holding a generous cash position should continue to be the plan. We should not feel as though we will miss things if we don't act now. Based on precedent, the market stands a reasonable chance of testing Friday's lows in the averages.
Please click on the following charts to zoom in.
Bill Holdings (BILL) does show a v-shaped pattern, but has shown a volatility contraction today as volume shrank from 767k shares Tuesday to today's 288k. It is also a recent new issue. Such issues often play hard to get. If it bases for a few more days, it becomes buyable above its 64.12 pattern high on confirming volume only. For very aggressive players only.
Natera (NTRA) is the only name on the Watch List close to completing a legitimate base.
In sum, cash remains king. Due to the ubiquitous presence of v-shaped patterns, subscribers should not feel any compunction to put money to work immediately. Precedent favors a test of the Friday lows in the averages.
For intraday ideas and analysis: https://twitter.com/mardermarket
Individual stock charts created using MarketSmith. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©TradeStation Technologies, 2001-2020. All rights reserved.
The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by Thomson Reuters. Expected earnings release dates provided by EarningsWhispers.