After a 8 to 10% correction , market is attempting a recovery. A sustainable bounce will require better breadth. As of now we have seen some improvement , but not enough.
As the downside has been contained , the upside is attractive once new leadership starts showing up.
If you see the Top ranked 100 stocks by 21 day momentum you will see new stocks are emerging. Many of these new stocks are in first leg of their swing. As the market stabilizes, some of them will go sideways and setup for next swing move.
Another thing to note is , market has started acting positively to good earnings. Which is change of nature from action in last few weeks.
The lower priced stocks are also showing signs of life with breakouts and follow through.
These early signs point to possible slow recovery in the market. Overall market might remain range bound but as we are interested in momentum burst , as long as they show up it is good market.
Tactically focusing on anticipating breakout is better in this market conditions as it offers you a lower risk entry and in case stock makes smaller magnitude move , you can still profit.
Range contraction and range expansion cycle is what we are focused on so focusing on range contraction setups in these conditions on both long and short side is better from tactics point of view. Buying breakouts may not offer same risk reward at this stage.
If the market remains range bound it will mean larger number of trades to achieve same returns objective with smaller per trade profit.
With some signs of normalcy returning to market an aggressive hunt for next game changer is also the focus area. One or two game changer candidates like FB last year which doubled from our entry point ,can make a year.
You can complain about the market or accept it as it is and find opportunities. Choice is yours.
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