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The momentum divergences we have been talking for the past few weeks were followed by more and more companies warning that the coronavirus will impact negatively their sales this quarter. It seems the market finally decided to listen. The Nasdaq 100 lost 2% on Friday and had two back to back distribution days. Semiconductors and enterprise software leaders were among the hardest hit. The recent uptick in volatility will probably be a wake-up call for many who have been chasing mindlessly momentum stocks in energy, space, AI or it might just be considered as another buying opportunity.
There are certainly enough stocks that are still holding well and even trying to break out. If this is the beginning of a deeper 5-10% pullback, those stocks will likely just build new bases, so there’s no rush buy them now.
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