Last weeks volatility set up a lot of stocks for big moves higher even if the market simply goes sideways.
If the market moves up, then these setups could be even more explosive.
Today’s trade is set up to continue a breakout that was pulled back by the recent market pullback.
Read below for your second chance at this great trade.
As you can see from the chart below, Allstate (ALL) was breaking out of a 4-week consolidation to all-time highs on the first big day of the market selloff.
It retreated with the market, but it held firm at the support of the 50-day moving average.
It has also rallied with the market and now sits at the original breakout level around $105.
Since this prior resistance could become resistance again, it’s prudent to wait for a breakout over Thursday’s high of $105.59 (but round that up to over $105.75) to enter.
The general market is still in a very fragile state, and we should expect more negative news. However, it’s not clear how the market will react to any new negative news.
As a result, the best stop is under $100 if you don’t want to worry about short-term volatility.
If you prefer to set a tighter stop, under 103 is a good level. Just be aware that the market could pull back towards last week’s lows before moving higher.
Of course, if the market breaks last weeks lows, you’ll most likely be glad your stop got hit sooner rather than later.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation