Wednesday, January 09, 2008

Oversold Bounce

What I'm showing is the number of Nasdaq 100 stocks that have closed below their volatility channels. As you can see, once 50% of the stocks close below their channels a bounce usually follows. Don't expect a big bounce and don't expect it to be immediate. I'm only pointing out that we need to wait to initiate any new shorts.

Below is a closer look at the 2006 correction. I looks like the index tends to bounce up to the upper channel and then heads down again. Don't forget to keep an eye on those follow-through days and new emerging leaders. They will signal a new uptrend.

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