Bases and Breakouts
One of the best indicators of stock market health is the the process of bases being built followed by stocks breaking out of those bases and resuming strong, sustained uptrends. Conversely, the failure of these breakouts to hold is a very powerful indication that the market is not ready to resume a long-term rally.
This week, I have been seeing many stocks consolidating in a neat and orderly fashion following the 2020 Presidential Election. Uber is forming a huge base and seeing lots of accumulation after positive news from California on Election Day.
Chinese stock YY is also close to emerging from a huge base. I've been seeing lots of strength in Chinese stocks this year, specifically from Nio, JD, and Bidu.
Wix, Adobe, Apple, Monster, Coupa Software and AMD are all back above their 50-day moving averages and worth watching for strong runs higher into the new year.
I also really like the way Tesla's chart is shaping up. I opened a position earlier this week. Sales Force and Futu are also shaping up well as is Celsius Holdings, which has earnings on November 12.
Stocks that have broken out are mostly holding their breakout levels which is a positive sign. Beam Global broke out on Thursday, then hammered off the breakout level on Friday, something which I always like to see. CRSR saw similar action as well.
Sun Power and Plug Power were both up over 25% this week and look like they are both headed for much higher prices. Recent IPOs Palantir Technologies and Yalla both had extremely strong breakouts this week as well.
These are all very positive signs for the market. We may, of course, see some back and forth action over the next few weeks, but as long as breakout levels hold and stocks continue to stay above their 50-day moving averages, I'll continue to remain bullish.
To learn more about trading breakouts and evaluating market health, check out my course page.
Full Disclosure: I currently own many of the stocks mentioned in this blog post.
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