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This Dip Will Set-up A Buy
www.oneoption.com
The price action Friday looked nasty, but this is just a normal pullback in a bull market.
PRE-OPEN MARKET COMMENTS MONDAY – The market decline last Friday was steady. The volume was fairly high and the selling was persistent. The dips were tiny and brief and the market closed on its low of the day. Once the momentum accelerated, buyers put their wallets back in their pockets. Asset Managers are not going to chase stocks at the all-time high, but they will buy dips. They will watch for signs of support and we need to do the same thing.
The post-election rally got a little “fluffy” and the quarter point rate hike by the Fed fueled the move higher. Now we are seeing a normal round of profit taking. We need to respect the selling Friday and I expect a probe lower in the next two days. I would like to see AVWAPQ and the 50-day MA hold. Ideally, the previous high at $586 provides some support right here, but given the selling pressure from Friday, we are likely to fall below it. Once support is confirmed, we should rally back above it.
The election is over, the Fed just cut interest rates and they have the latitude to cut them again if needed, economic growth is solid, job growth should be stable now that the storms and strikes are over, earnings season has been excellent (NVDA Wed), inflation is tame and we are in a period of seasonal strength. From a technical standpoint, the market is in a strong up trend.
The news is light this week and there is not much to drive the action. After this week, we go into holiday mode next week. When the market finds support this week, we should have a good opportunity to buy. As the market grinds back we will have a slight tailwind and that might be all we have to work with for the next two weeks.
For swing trades I would be looking to add if this dip is brief and shallow.
For day trades I would not trade the long side until we probe for support and until we see a nice big bounce. I don’t believe today we will see that move. Overseas markets are a little soft. After a big down day, this is likely to be a day of rest.
Support is at AVWAPQ and resistance is at $590.
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