Friday was an ugly day for stocks, but if the market doesn’t fall out of bed on Monday, there is a silver lining.
Since the selloff was precipitated by the President escalating trade tensions, there’s a chance that he’ll try to ease the market’s concern this week.
If the market stabilizes here’s how you can find great trades.
There are strong stocks that get pulled down when the general market is as weak as it was on Friday.
These strong stocks will snap back into their uptrend as soon as the market allows them to.
When you have a particularly negative market day as we had on Friday, a simple pattern to look for is a strong stock that retraces to support, then rallies back over the high of Friday.
The buy trigger is the trade over Friday’s high, and the stop is under the Friday low.
Below you’ll see a chart of Take-Two Interactive (TTWO).
Last Monday it gapped out of a flag pattern and ran to new highs.
Friday brought it back to last Monday’s low. This is a good area of support, and if TTWO trades higher, Friday’s low will be a good level to use for a stop.
So following the pattern described above, the buy trigger is a trade over $132.60, and the stop should be under $128.30.
Keep in mind that if the market rallies, it is still very vulnerable to another day like Friday.
Don’t over trade.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation