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Is the April Pullback Over?

Probably not yet -- but there's more going on underneath. Let's lift up the hood and take a look.

The Market

So, we got a headline about a higher tax rate on capital gains, and the market gave up the rally. All it did was come back to Tuesday’s low. In fact, let’s talk statistics. The Russell 2000 was barely down, unlike two days ago. Heck, unlike the last few weeks where it led on the downside. Today, it held firm. The breadth on the New York Stock Exchange was negative 720, which, for a day the S&P was down 38, is pretty contained. Volume was also fairly contained, since down volume totaled 59%.

Keep in mind yesterday down volume was around 13%.

What does that all mean? It means the S&P gave up the gains from yesterday, but breadth did not nor did volume. Over on Nasdaq, both breadth and volume were flat, despite Nasdaq falling 132 points. In fact, check out the number of stocks making new lows on Nasdaq, because there were only 28 new lows. Two days ago there were 138. Contracting new lows is a positive, not a negative.

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We were expecting a pullback in the second half of April, and we’re getting it. As we have come to learn from the ups and downs in the market in 2021, eventually we get back to an oversold condition, eventually sentiment gets too bearish, and eventually the selling dries up. And then we can look for another move back up. I just don’t think we’re done with the pullback yet, even if we rally tomorrow.

New Ideas

About a month ago when the banks had an intraday reversal which you can see on this chart of SPDR S&P Regional Banking exchange-traded fund (KRE) - Get Free Report, I suggested selling some banks, or KRE. I was asked the other day about shorting it. My sense has been that we often see everything come down to support and stop. You can see the green and black lines intersect around here in the $65 area. If that breaks then I do think $60 is in play.

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Today’s Indicator

The 21-day moving average of the put/call ratio for exchange-traded funds is still too low and needs to move up. We need to see a little more fear, more hedging taking place than we’ve seen.

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

I am usually a fan of bottom fishing, but JD.com (JD:Nasdaq) makes me a bit nervous here. That having been said, the risk/reward is actually pretty good, because if it turns south and breaks last week’s low you know you’re wrong and if you are right it should trade up near $80, where the next resistance is. A break of last week’s low measures very far down so you know where to put your stop.

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Toro (TTC) - Get Free Report is still a good chart, but the problem for me is that it hit its upside target in this $115 area, so now it needs to go sideways or correct. But that’s the worst I can say about it. You do not want to see it gap down under $110, because if it does that it will leave an island overhead.

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OK, I am intrigued by Rolls Royce (RYCEY) , because every other car, truck, or parts maker is on a tear and this is not so I’m inclined to think it can play catch up. But it is a one dollar stock, which makes it highly speculative. If it breaks those February lows the next stop is probably a buck so you know where you are wrong.

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Federal National Mortgage (FNMA) trades so thinly, so I think I would wait for it to show it wants to get over $2.50 and then once over it I would use that as a stop in case it popped and dropped.

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I would like to buy Church and Dwight (CHD) - Get Free Report between here and $88. This is a stock working on a base to me.

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High on Tech

High on Tech

Let's check sentiment, why you shouldn't trust any bounce from the producer price index number, and what the heck is up with those put/call ratios?

Bond Relief

Bond Relief

Here's why bonds could use a little respite as they were the only thing to really move today. Also, let's look at sentiment and McDonald's.

Breaking Bank

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A Rally Last Week? What Rally?

A Rally Last Week? What Rally?

It's almost like what happened last week never happened. Also, let's check the indicators, the overbought reading, energy, transports and ... Tesla.