Momentum Monday – The Dip Was Bought Again

The charts on Momentum Monday are powered by MarketSmith´╗┐

The best buying opportunities in bull markets happen after a pullback but buying that pullback is easy only in hindsight, especially if it is the one like we had last week. It was a volatile week, during which the major U.S. stock indexes (SPY, QQQ, IWM) went below their 20-day moving averages only to bounce sharply and finish near new 52-week highs. 

Not all sectors bounced equally. With a few minor exceptions, we saw relative weakness in software names. So many sold off after their latest earnings report. SHOP went against that trend and after a big drop on Monday, staged an impressive 60-point rally. It continues to look constructively. Maybe, only MSFT, SPLK, and DOCU are looking better but both are a bit extended from their bases. Most of the other software leaders are actually looking vulnerable to further downside, especially considering the tax loss harvesting that happens at the end of the year – TEAM, MDB, OKTA, etc.

Biotech is still the undisputed leader. Quite a few of the biotech stocks are extended and yet they keep going higher, mainly due to short squeezing and rumors of potential acquisitions.

Consumer discretionary stocks shined on Friday after another much better than expected jobs report. SBUX has returned to the Momentum 50 list. I like how it found support near its rising 200-day moving average and it close strong above its 50-day moving  average on Friday. $87 is the next technical hurdle and if it is cleared, it is going to 90.

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