I believe that a 2 -3 day bounce in the market indexes is very likely at this point. Do not get me wrong. I still think that the overall market indexes are in an intermediate term down trend. However, I think there is a high probability of a multi day bounce. I will be looking to play this bounce by swing trading CSTR, CRUS and adding to my position in APKT.
CRUS, CSTR and APKT have all been out performing the overall markets during the recent correction. In fact, with the exception of APKT which has traded sideways, both CRUS and CSTR have managed to move up to new highs during the recent 3 - 4 day bounce in the indexes. However, with the recent five day pull back in the indexes CRUS and CSTR have both consolidated and have formed beautiful flag patterns above both there 20 day MA's. This is extremely bullish and leads me to believe that if the markets bounce over the next few days; these stocks will spring up to new high levels and make moves much larger than the market indexes.
The green arrows show the pivot lows formed at the dates mentioned above and that while the index's second low is about the same level as the first; CSTR's and CRUS' second low are well above their first.
Another interesting pattern to note is the volume signature of the stocks compared to the indexes. Note that where as the volume swelled on the indexes declines and dried up on the rally the opposite has been true for the individual stocks highlighted. This is another very bullish indicator.
So in addition to the underlying fundamentals which I have already highlighted in previous posts I am very confident that if the markets bounce these stocks will move at least 3 - 4 times the amount I will risk on them.
So that is my modified trading plan for tommorrow. I certainly hope that the markets bounce and follow through nicely into next week. I have noticed a tendancy for the markets to start out strong sometimes even gapping up at the open then promptly selling off the rest of the morning and some times for the rest of the day. So I will be very cautious around the open especially if we get gaps up in the individual stock and wait for the first 3o mins of trading or so to pass before I inititate any positions.
Good luck tommorrow and for the rest of the week!