This is a time to be cautious, and look for the stocks that will likely lead the next market rally higher.
When markets pull back, flag patterns in stocks that have outperformed during the market rally are a very simple way to identify great trade opportunities.
Here are two simple criteria for identifying potential opportunities.
1. If the stock is trading over its October 2018 high, it has outperformed the market recently.
2. Look for a small correction from its recent highs, which could be defined as being over its 10-day moving average or a 5%-7% pull back.
If a stock maintains these criteria as the market pulls back, then as soon as the market begins to head higher again these are the stocks to focus on.
Today American Tower Corp. (AMT) fits this description.
Even if it were to pull back to the support created by its prior swing highs it would be a small correction.
If the market is not moving lower, and AMT trades over its prior day’s high, that is a set up worth considering. The stop would be under the low of its correction.
Right now, those criteria would equate to a buy point over $172.50 with a stop under $168.80.
Be patient, build a list of stocks like this, and when the market starts to head higher you’ll have a hot list of market leading opportunities.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation