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Established in 1994 by Greg Capra, well-known technical analyst and successful trader, Pristine has successfully taught thousands of people to consistently profit from the markets for over 20 years. Greg and Pristine have appeared on CNBC, Barron’s, Investors Business Daily, International... More
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  • Good Stocks - Bad Market 0 comments
    Oct 31, 2012 8:42 AM | about stocks: QQQ, GSD.B, YHOO, CREE, HOG

    In a correcting market environment you better know how to determine which stocks are "acting well" and which aren't if you're going to trade the long side. Acting well is a term often used to communicate that one tradable instrument is outperforming something else. This could be the broader market, a sector, another stock or a market internal gauge. For the stocks we are going to look at it, will be relative to the broader markets. It can also mean how that tradable instrument reacts to gaps, support, resistance or the lack thereof.

    In addition to knowing which stocks are acting well, you'll need to be able to determine with relative accuracy when the market is likely to bounce a bit. In a correcting market even the stocks acting well have a greater tendency not to rise when the market is falling. However, when the market makes a short-term low these stocks are likely to act even better. Meaning, go higher.

    The first thing that we want to consider is the market timing. For this example I will use the Nasdaq 100 ETF symbol QQQ, which has actually been weaker than the S&P 500 and the Russell 2000.

    QQQ has reached its first area of price support since breaking down (closed the VOID) and has stabilized between 65 and 66. Friday, prices broke below the prior three days lows, which were very close to each other (a minor breakdown) and rallied back up toward the high of the day. Pristine Tip: A Bottoming Tail (NYSE:BT) bar that forms in this way - at prior price support - is a strong indication of a short-term low. Now we need to see if QQQ can trade above Friday's high for confirmation of this price action.

    The chart of YAHOO (NASDAQ:YHOO) is most interesting in that it bottomed at close to the same time that QQQ topped. YHOO began to show its strength when it was able to move sideways, rather than retrace lower after the strong rally that created a Pristine Price Void (PVV) below. As QQQ began its decline, YHOO moved sideways at the prior resistance to the left and absorbed that supply (red area). This is what I call acting well. Once it formed a new support pivot, buyers came in when prices dropped back to retest that area. Lastly, YHOO gapped above the sideways consolidation it had formed creating another PVV and has held above that area. Wow, YHOO really acts well!

    CREE is another stock that acts well. While it did have a failed breakout and then move lower with QQQ, it recovered relatively quickly. Like YHOO, CREE has moved sideways at its prior resistance and is absorbing the supply there (red area). Plus this is happening after a large gap up that created a PVV. Also, on 10-19 when QQQ formed a Bearish Wide Range Bar (-WRB), CREE formed a BT! CREE then formed a new support pivot, has not even come close to test it, and after Friday's bullish day it isn't likely to. Cree is looking real good.

    I pointed out that Harley Davidson (NYSE:HOG) had formed a bottom on 10-19 on my first post on Twitter. While HOG was showing relative weakness to the broader market prior to October, it was bottoming. As I showed at Twitter and Facebook, the reason this bottoming action really interested me is because the monthly time frame of HOG was a Pristine Buy Setup (NYSEARCA:PBS). You can check out the charts at Twitter and Facebook. Like YHOO and CREE, HOG is moving sideways after a strong move at resistance and is absorbing the supply there (red area). Notice that HOG broke below the prior two day's lows on Friday. While it did not recover back the high of the day; these breaks can result in a move higher if prices move above high. HOG is acting well too.

    There are other stocks out there acting well and now you have some of the guidelines of what to look for. What to learn more? Sure, who doesn't? This week's Free Workshops are packed with education lessons that you do not want to miss. Check out the line up and get registered early. I will be doing Tuesday's workshop. In it I will show you what I do with our students in my coaching sessions. We'll go over concepts like VOIDS, Creating Support and Resistance, Absorbing Supply, Failure Patterns and a lot more. Those attending will receive a free educational gift also. This session will not be recorded as my coaching sessions for students to review. I look forward to working with you Tuesday!

    All the best,

    Pristine Capital Holdings, Inc.

    Pristine - A trading style often imitated, But NEVER matched

    A free Pristine service published on select Mondays

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    Stocks: QQQ, GSD.B, YHOO, CREE, HOG
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