Yesterday I discussed the criteria for a good pullback pattern in a weak market.
After the market starts to resume its major trend, there are additional characteristics to look for to find good trades.
Here’s what good trades look like now.
Yesterday’s market rally may have marked the low of the short-term market pullback.
If that’s the case, then the first stocks to break out of consolidation created during the market pullback often have great trend trades.
Today’s idea has the potential to fit this pattern.
Akamai Technologies (AKAM) has a tight consolidation pattern on its 200-day moving average. In fact, it fits yesterday’s criteria also – held support during the market pullback.
The trade setup is to buy over $72 which is the consolidation high. To keep risk small, the entry should not exceed $72.50.
Once the breakout occurs AKAM should not trade back under the recent pullback low of $69, so that’s the best stop. However, to reduce risk the of the breakout day which is well under the breakout level could also be used, 70.50.
These breakouts are best when they happen before the market breaks its swing high, but they can also work when they follow the market.
Rick Nartarian, Chief Investment Officer
The American Investor Daily