A relief rally | stockbee


A relief rally

After 8 days  of significantly above average selling pressure a relief bounce yesterday was not a surprise. Deeply oversold levels tends to attract short term mean reversion traders who use computer models to enter, it attracts bargain hunters, and the shorts who shorted at higher level cover. This combined with end of quarter resulted in a bounce.

Considering the amount of selling we have seen a 340 stocks were up 4% , that is not a significant number. In short run the bounce will likely persist for 3 to 5 days. These kind of bounces are dominated  by deeply beaten down stocks. T hey bounce back the most during such relief rallies.

If the move has legs  and if it indeed becomes a bottom then in 3 to 5 days you quickly see attention shifting to stocks with momentum and new leaders.

No matter how the rally progresses it is good idea to create an anticipation list from top momentum stocks. New leadership will emerge from them.

Another good place to find new buy ideas is IPO's. Many of them are holding up relatively well during correction. They  are likely to breakout soon.

Whats on your anticipation list ?

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