Okay, so I’ve been calling for a corrective market for some time now, and it’s playing out as expected.
And now I expect a second leg lower that will retest April or February lows. This is based on the fact that we have not seen a strong washout, otherwise knows as capitulation yet, and market breadth continues to look very poor.
Thus, my bias is to fade bounces.
Sure, we can play very short term bounces if we can catch them, since bounces tend to be very strong in bear markets. However, our money trades come from selling the bounce, taking profits at bounce failures and establishing shorts.
However, as we’ve seen over the past few years, the market can change on a dime and negatives can turn into positives very quickly. For that reason, whenever there is a selloff, I build a relative strength list of stocks. These are stocks that hold up well during the corrective phase.
Relative strength stocks tend to be the best performers if the market recovers. Once I identify a shift in trend, I got straight to my relative stregnth watchlist.
In today’s video, I show you stocks on my relative strength list. Take note of these stocks and put them in a watchlist. If the market receivers, these are your long plays.
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