This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Fiscal 'Pop-n-Drop' for Equities -- Look Out

NEW YORK ( TheGoldAndOilGuy.com) -- Today's gap higher in stocks has many investors feeling really good about the market. But will this rally last?

My to the point answer is "Yes," but there will be some bumps and navigating positions along the way.

Looking at the charts below you will notice how stocks are trading up over 4% in two trading sessions and several indicators and technical resistance levels are now being tested. Naturally when dealing with several resistance levels across multiple time frames, cycles and indicators we must be open to the idea that stocks could pause or pullback for a few days before continuing higher.

Here is a quick snapshot of charts I follow closely to help determine short-term overbought and oversold market conditions.

Momentum Extremes:

This chart helps me know when stocks are overbought or oversold. This trend can be followed using the 30- or 60-minute charts, helping you spot short-term tops and bottoms.

Stocks Trading Above 20-Day Moving Average:

This chart helps me time swing trades that last for one to three weeks. I use the daily chart to spot these reversals and trends.

Daily S&P 500 Index Chart:

This chart shows the big gap in price, test of upper Bollinger band, momentum and swing-trading cycles topping and 12 buyers to ever one seller on the NYSE, which tells me everyone is running to buy everything they can today and that is a contrarian signal.

Trading Conclusion:

This strong bounce which started on Monday from a very oversold market condition does look as though it has some power behind it. And over the next one to three days we could see prices grind higher until this momentum stalls out.

Once that happens we should see most of the gap filled. This will provide us with a lower entry price and reduce our downside risk for index, sector and commodity ETFs.

This type of bounce and momentum can lead to a running correction, which makes it impossible for traders to by on a dip. A running correction is when prices slow-chop higher in a narrow range for some time then explode higher continuing the rally. This is when you just need to jump in trades and chase prices higher but we will not do that until I see signs of a running correction.

Today many of the major market moving stocks are testing resistance, which means if they start to get sold the broad market will pullback with them.

Follow all my trades for 2013 on my Web site.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs