Underneath the surface the market continues to deteriorate, 1-month new lows and 3-month new lows continue to expand. The Nasdaq Composite is nearing all-time highs but yet the ten-day moving average of 52-week lows minus 52-week highs is almost at breakeven, but FAANG-T is doing well, and the indices minus the Russell 2000 is masking all the weakness. Negative breadth divergences are not really actionable, like everything else in the market, sometimes it works other times it doesn’t, but negative breadth divergence is weak signal more often than not.
Regardless, we still have some decent set-ups, and we have to give stocks the benefit of the doubt, negative divergences can right themselves if more stocks start to participate, which can very well happen.
$SGMO, $CHGG, $MTLS, $BZUN, $OLED, $WRLD, $RLGT, $PDLI, $OSIS are the names on my swing trading watchlist, these names are some of the top momentum names currently that are going through a low volatility period. We want to get involved at the first sign of expansion.
Like Pradeep Bonde says- stocks move in momentum bursts that last 3-5 days.