Did You Miss This Bottom Pattern?
Yesterday’s market plunge actually got worse after the market closed.
Most people don’t pay attention to the overnight trading session, but sometimes it can be important.
While I’ll still remain defensive, it’s worth noting the overnight pattern as a potential bottom, and adding today’s trade idea to your watch list.
Read below to get both
I don’t have a chart of last night’s trading in the SPY, but the pattern is as follows.
1. Big daily decline
2. Very bearish news announced after the market closes.
3. Overnight trading plunges below the daily session lows
4. After the initial plunge the market consolidates for at least 30 minutes, then it makes a new low.
5. The new low does not follow through, and the market rallies sharply.
6. The market opens the next daily trade session substantially higher.
What I’ve just described is a market that panicked then immediately reversed.
This is a pattern than creates market lows.
It’s even more interesting when you consider the fact that it occurred at the 200-day moving average.
The next step is for the market to continue higher.
In the same way that I recommended waiting for a day or two after the Fed meeting before getting bullish, it’s prudent not to try to pick a bottom today.
That said, there are some stocks that held up nicely yesterday that are worth considering as longs if the market holds an moves higher.
If you’re a regular reader of this column, then this trade idea will sound familiar.
As you can see in the chart of CME below, it closed strong yesterday, and it’s on its 50-day average.
While I would not enter today, this is a stock I’d consider buying if it breaks out to new highs (over 207.50) in the next several weeks.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation