Downside Reversal - Warning Sign?
Hi everyone,
I hope you are having a great Wednesday!
In this post I’ll concisely share my thoughts on today’s action. And share a bunch of stock charts that caught my eye. Today
Now let’s dive in ↓
Market Action
In yesterday’s post I wrote “Be prepared for sell off days/profit taking days and know how you will react and your plan. These will come and test your conviction. Whether that is cutting weakest/lowest conviction stuff quickly or staying with longer term rules… know what you will do in advance”
Today we saw such a reversal day.
The QQQ lost 1.5% and broke the lows of the past few days. This can happen quickly when we are short term extended and wedging higher on low volume.
We remain above the rising moving averages but in the short term watch out for more weakness. What would be constructive would be if we can’t push much lower and consolidate sideways letting the 21ema catch up
The IWO now failed the short term range breakout and now looks to fill that gap
Volume
Volume was higher on the NYSE and on the Nasdaq.
Trends ( Based on QQQ)
Shortest - 5 Day SMA - Down - Below Declining
Short-term - 21 ema - Up - Above Rising
Intermediate term - 50 sma - Up - Above Rising
Longterm - 200 sma - Up - Above Rising
Group/Themes Action
Many growth names down 3% plus.
Group performance chart from TraderLion:
Key Stocks in Deepvue
AMD 3 bar break too the downside after a failed push higher yesterday
NVDA downside reversal
DKNG reconfirm down, back at the base pivot area
AFRM sharp reversal
PATH mini expectation breaker
CRWD. Even this and ANF were red
MARA crypto names reversed hard
Market Thoughts
This is a potential tipping point. We were extended and have now had a sharp 1 day pullback. Watch out for further weakness and know your plan. We remain above the moving averages so this could just be the start of a sideways move.
Grade your holdings and know which ones you would cut first.
Be ready for anything.
Reminder:
Risk Management is Paramount
Refuse to enter randomly without managing risk and wait for the spots to develop, they will. Stocks during strong moves always pull back to the 21 ema, 50 sma multiple times.
Have patience, focus on the best stocks with the greatest potential. These will telegraph the rest of the market.
Take it day by day and manage risk along the way. Be ready for anything
What are your thoughts on today’s action? (Leave a comment below)
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Cheers!
Richard
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I’m thinking the market is pricing in the impact of supply chain shortages on inflation.