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The best-performing stocks in the initial stage of a relief rally are typically the ones that were hit the worst during the correction. This is exactly what we saw last week – mortgage investment trusts, casinos, cruise ships, restaurants, homebuilders, airlines went up 30-100% in just a few days. Most started to fade as they approached their declining 20-day moving averages towards the end of the week. The next potential stage of this relief rally is a choppy range-bounce price action during which we will probably see a rotation into the stocks that held the best during the correction.
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