Follow the Bouncing Stocks
This week, about 50% of the stocks in the S&P 500 fluctuated closely around their 50-day moving averages. This reflects a market that is attempting to find temporary traction and effect a bounce.
Stocks Above 50-DMA
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As I wrote on Monday, if you're looking for a bounce, you have to know where to look. Technical bounces occur at previous levels of resistance-turned-support trend lines, Fibonacci retracement levels and retests of key moving averages. The 21-day and 50-day moving averages reflect short- and intermediate-term trends and often comprise areas that see reversal moves or short-term bounces in a stock. Continuing with that theme, here's a look at three more stocks that are attempting to hold above their 50-day moving averages.
The first two, Avis Budget Group (CAR), the car and truck rental company, and the mortgage insurer Radian Group (RDN), have short interest levels of 12% and 27% respectively, and short-covering could turn a bounce into a more significant move higher.
CAR and RDN
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The chart shows Avis shares holding above a zone of support between $27.50 to $28.00 and its 50-day moving average for the last two weeks, and the longer the test period, the stronger the base and ultimately the more sustained the move. The area between the $12.50 level and the 50-day average is the platform from which Radian shares could move higher.
The final 50-day bounce candidate is Time Warner (TWX), which formed several high wave candles above the average that were followed by a large white candle and continued buying in today's session. This reflects a transition from indecision to more positive price action. Money flow will need to improve if there is to be any real momentum to the bounce, but the relative strength indicator is attempting to cross above its centerline.
TWX
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Long entry points require a close in upper candle range, and initial stop levels are clearly defined by the support levels directly under the 50-day moving averages.
At the time of publication, Moreno had no positions in stocks mentioned.