This week I’ve been focusing on stocks that are strong and have the potential to accelerate higher with any move higher in the market.
This is because the market has resumed its up-trend after and adequate pull back. When this market condition exists, strong stocks begin much bigger moves than the market.
Today I have another stock that has this potential.
Avalonbay Communities (AVB) fits the big break pattern I discussed yesterday.
Plus, since it has moved significantly above its first breakout level of $197.70, this is a stock that has a good pattern to buy on weakness.
In case you didn’t see the last two days of this article, the big picture pattern I’m focusing on is one in which the stock has moved to a new 52-week high and consolidated rather than accelerating higher.
In the case of AVB, it moved over its December 2018 high of 192 in February and consolidated above that level.
After 6 weeks of consolidation, it’s beginning to move again.
The initial breakout buy point would have been during its move over 198 earlier this week. Don’t worry, you have not missed it.
It’s normal for this stock to move as much as $2 -$3 in a day, so a good trade for entering a breakout is an entry between $198 – $200.
There are two good levels for a stop. One is under 194, and the other is the low of the consolidation at 192.
AVB also has a good set up to look for a retracement to enter lower than its current price.
If the market pulls back and AVB does the same, it has good support between $197 – $198 so a ‘buy the dip’ entry in this area is also an attractive trade using the same stops.
Since the market has rallied for 3 days, a pullback into the end of the week could easily happen.
Keep in mind, the reason this breakout is also a good retracement candidate is because it has moved significantly above its breakout before the pullback. So don’t assume any breakout that pulls back is a good retracement to buy.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation