The Nasdaq 100 (QQQ) has dropped almost exactly 10% in one week, but is finally seeing a little bounce action Tuesday — and I’m also snapping up some stocks.
Remember, just one week ago, the entire market gapped higher at the open on a better-than-expected consumer price index report, but it has been steady selling ever since. Despite the intensity of the selloff, barely a bounce has been attempted, but finally, now the dip-buyers are showing more interest.
Amid the action Tuesday, I’ve been buying names such as Direxion Daily S&P Biotech Bull 3X Shares exchange-traded fund (LABU) , Aehr Test Systems (AEHR) , Nio (NIO) , Beyond Air (XAIR) , and Sensus Healthcare Inc. (SRTS) , but I will become more aggressive later in the day if the indexes can stay positive and breadth improves. Breadth is around five gainers for every three losers currently, which isn’t bad but it should improve if this bounce is going to gain some traction.
The great difficulty that traders face right now is that plenty of oversold readings exist, but we have no good technical support. Many individual stocks, as well as some of the indexes, are close to testing their 12-month lows, but they are so oversold after selling off for a week that there is some buying interest.
Apple (AAPL) provides a good illustration of what has happened recently. The stock gapped up to almost $150 last Tuesday morning and hit a low of $130 this morning. That is a drop of 13.3%. Buyers finally jumped in this morning and have the stock slightly positive as it has bounced $3 off the early lows.
This is not a market that is likely to produce sustained “V”-shaped moves like we used to have in the recent bull markets, but with many stocks deeply oversold and the potential for some seasonality to end the year, the buyers are going to start inching in the longer the indexes stay green. Trust is always low when a bounce starts, but confidence builds the longer the indexes can hold up.
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