The Best Way to Play a Trend
We often find good trend trading setups that are temporarily oversold on a daily chart before they make their next move higher within a long-term uptrend. Using technical analysis to intelligently buy stocks with rapidly improving fundamentals on a dip.
Its good to find these elite stocks that are temporarily oversold on a daily chart using technical analysis. Its even better to find them oversold on a weekly chart.
During the recent pullback on the Nasdaq, many of our favorite growth stocks that we like to trade corrected and became oversold on a weekly chart. The pullback for tech stocks and growth stocks was greater than most other stocks which has created a lot of these opportunities right now.
When I say ‘oversold on a weekly chart’ using technical analysis, its better to give you an example. Below is a chart of a stock we featured recently before it started to surge higher. Google.
As you can see in the chart, Google has been in a strong uptrend over the past couple years. You can define the uptrend support by drawing a line connecting the lows over the past couple years.
We need to see the price touch the line at least 3 times while not going below it for the uptrend support to be valid. The more times the price touches the line without closing below it the better. In this case, we are working on our fourth pullback and rebound off the support line.
Above and below the chart we see CCI and stochastics. Without going into the mathematics behind this technical analysis tool, a stochastics reading below 20 is considered oversold. And a CCI reading below -100 is considered oversold as well.
The line drawn in the upper right connecting the highs in the latest pullback to the support level is what we call the ‘downtrend resistance’. Using our trend trading methodology, the entry signal occurs when the price closes above this line.
In this case, the price had already closed above the line when we featured Google so the target entry was the next morning. Shortly after we featured it, the stock surged $35 higher and is still on the march.
We have many elite growth stocks and companies beating expectations with rising estimates near ideal entry points on a weekly chart throughout the year. Click the link below to view our latest, top trading opportunities.
Brian C Neall – Founder