There is a good possibility we are done with the first leg down. We say that as we can see 5-waves down and a tag of some support levels. The reaction off of those support levels was exactly what you wanted to see. Powerful and with conviction.
Notice in the chart above the 50 day average is at 1100? That’s going to serve and a point of initial resistance.
The blue circle is actually about 5 days worth of market action in a range of 1070-1090 with a spike down to 1050 ish thrown in for good nellie action.
In the first chart we talked about 1100 being the 50 day average and not only that it’s also a 38.2% Ffibonacci level as shown in yellow. What we also want you to make note of is the confluence of the blue 38.2% Fibonacci retracement level and the 50% yellow Fibonacci level. See how close they are? That’s confluence and what is commonly called a Fibonacci cluster. We really want to watch those levels next week or the week after for resistance and stalling.
This doesn’t mean we are out of the woods but we liked the action we saw Friday. So IF we now enter into a period of a Wave 2 (upward bias, or the alt count) then it ought to look like an ABC up when all said and done. The reason we say we are not out of the woods yet and why we may see some morning weakness come Monday is because of the chart below. It’s the S&P 500 in a 1 minute time frequency.
As you can see we stopped cold on a downtrendline. So we could chew around there for a few more hours but we’ll tell you this, an upside break of the pink line ought to be powerful so watch for it.
By the way all the indexes out there show this pattern.
In summary:
Make no mistake the damage done to stocks out there will not repair itself overnight and a lot of names are going to take months if at all to build all new bases. There is also a real good possibilty that we will not see the April Highs again for a VERY VERY LONG TIME. Keep that in mind.
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IT’S ALL ABOUT BUYING LEADING STOCKS AT ALTERNATIVE, LOW-RISK ENTRY POINTS
It’s no secret the market has been selling off aggressively all month. This has created fear by the average investor which also coincides with stocks having pulled back to areas of solid chart support.
We don’t just guess or throw money into to stuff because the market is oversold.
Instead, we understand current market conditions and whether or not it’s better to be a buyer or selling stocks short.
Then once we know what zone we are in, we scan the market for quality stocks that have pulled back to areas of support. We do this because we want to buy stocks at alternative, low risk entry points.
You’ve heard us say time and time again that we don’t chase buses. Instead we wait for stocks to come to us and buy them at points where our risk is minimal.
Here’s some leading stocks at alternative, low-risk entry points:
You can see by the blue lines that there are multiple areas of potential support for AAPL.
A text book example of how to buy a leading stock. In this case you can see that it pulled back to multiple areas of chart support.
DNDN has also pulled back to an area of support which also coincides with the green uptrend line and 50-day moving average. Why chase it and buy it in the 50’s when everyone is talking about it and has to have it when we can let it come to us and buy it in the 40’s?
It’s really simple — we buy support and sell at resistance. Another example of a leading stock pulling back to support where we are buyers.
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