For weeks now, there have been signs of stress under the surface. Stocks were priced to perfection heading into earnings season, and despite solid numbers and guidance, many reports didn’t justify those lofty valuations. As a result, we saw numerous sell-the-news reactions unfold. It also didn’t help that, as of last week, we’d had three noteworthy reversals off fresh highs in the indices, starting back in June.
Still, the indices showed little indication of concern, at least until tensions with North Korea gave traders an excuse to do some selling. Unfortunately for the bears, however, they were once again unable to generate any downside follow-through, as the market bounced right back on Monday.
The fact is that dip buying has worked so well for so long that market players aren’t going to give up on the tactic until it bites them, which obviously hasn’t happened yet. The good news is that the action under the surface over the past several weeks has given us a mild rotational correction and has created some pullbacks in some very extended individual stocks. That’s what helps set up new opportunities, and is what we constantly work hard to uncover for our community of active investors.
Let’s take a look at some charts:
At the time of this post, RevShark had no position in any of the stocks mentioned.