Rebound from sell-off

By Jani Ziedins | Intraday Analysis

Apr 11

S&P500 daily

The S&P500 rebounded nicely this morning, up 1% and is back in line with the ~1370 support level.  Is this the all clear signal to start buying again?  It would be nice if the market was that predictable, but one day does not make a rally.  Using CAN SLIM follow through rules, it takes at least 4 days to signal a legitimate rally attempt.  By showing constructive price action over 4+ days holds the market to a higher standard and helps us sidestep inevitable head-fakes and false bottoms.  Having a delayed confirmation might make us a little late and miss some bottom-picking profits, but the lower risk of getting caught up in a false-positive makes waiting the prudent move.  People buying at these levels are simply trying to catch a falling knife and most often that is a fools game, but that sure doesn’t stop people from trying.

We are just one week removed from 4-year highs in the S&P500, so this wouldn’t even qualify as a correction if we are bouncing already.  Typical corrections last several weeks, so if anyone feels that a correction is in order, they should be highly suspicious of this rally attempt.

Many leading stocks are taking a drubbing over the last few days.  INVN looks downright broken, but the upshot is it continues holding at previous support at $15.  This level is probably make or break for the stock.

KORS took a hit yesterday, dropping 8% after holding up so well over the last couple months.  But it is finding support at the 50dma and still holding comfortably above the gap-up on last quarter’s earnings.  This will be one to keep an eye on for when the market firms up and resumes the uptrend.

LNKD has traded sideways since its earnings gap, but given the price action of the rest of the leaders, sideways is actually demonstrating strength.  Again another one to keep an eye on.

Other names are finding support at the 50dma too like BWLD.  Depending on the length of this market pullback, if it is a short one, 50dma bounces could be the best way to get into leading stocks that were previously extended from buy-points.

And of course there is everyone’s favorite, AAPL, that is marching to the beat of its own drummer and completely oblivious to any weakness in the broader market.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.