All the major stock indexes have rallied into significant levels of resistance, so I’m looking for the setups to buy on the next minor decline.
Today I’m looking and a whole sector that is often overlooked, but it just broke out of a very bullish pattern.
Read below for the great retracement trade setting up now.
As you can see from the chart below, the Solar ETF (TAN) had been consolidating since February.
The consolidation is particularly bullish for several reasons.
1. It began right after the 50-day average crossed the 200-day average.
2. The lows of the consolidation are progressively higher
3. The lows of the consolidation held above the 50-day average
4. The final month of the consolidation was very compressed
The tight, well-defined compression right before the breakout over $26 should hold as support on a retracement, there is also good support at $25.50.
The best place for the stop is under $25.50.
There is a little support in the area of $26.50, so if the market does not sell off significantly, this may be as far as TAN will pull back.
As a result, the buy zone is between $26.00-$26.50. I would not be a buyer under $26 as that would indicate the breakout is weaker than my expectations.
Rick Nartarian, Chief Investment Officer
The American Investor Daily