Market Flashes A Buy Signal

We had quite a show last week. In my previous post after Tuesday's close I speculated that we might be in for a wedging rally that would provide some shorting opportunities. On Wednesday all indices flashed a follow through day, which is a big up day on increased volume. I became a little sceptical about the shorting idea. I always tend to wait for some sort of confirmation and it came on Thursday when market again was up on big volume. To me, the message from the market is loud and clear. After two months of choppy corrective action, stock market may be ready to attack the new highs.

However, after five consecutive days of advancing prices, everything is now overbought. I'll discuss trading plan for next week later, but the fact is that I missed the first round of breakouts and will have to wait for some sort of pullback. A lot of leading names are extended and after some corrective move in the market we should get a pretty clear picture whether this rally was for real or a trap. I certainly hope the market will give as much needed low volume correction and that leading stocks will hold up well.

As for trading ideas, there are many stocks setting up buyable bases. After an extended market I wouldn't not want to buy breakouts as they like to fail if face of a weak market. The following three stocks are members of my top watch list:

VRX

The base formation of VRX is best seen on a weekly chart. Stock has been in a nice uptrend for several months and right now it is completing its first decent correction in form of a pretty tight channel base. A breakout above 55 is a buy point.

SODA

SODA made its first breakout from a four month channel base when the market was still going down. During the weakness it has successfuly tested breakout area and is now in a new uptrend. Any pullback down to 60 or a little below could be a great opportunity to load on this promising stock.

QCOR

QCOR has its breakaway gap up in april and has drawn a solid uptrend since then. During market correction it has consolidated in two base on base channels. On Friday it unfortunately broke out and quickly became extended. Any decent pullback down to the trendline should provide a low risk buy opportunity.