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2 Low-Risk Trades as Market Internals Indicate a Trend Reversal

by | Sep 8, 2021

Trading action could begin to pick up on Thursday with the latest jobless claims report. We’ll also gain momentum as institutional investors come back to the market while indicators are showing a possible trend reversal. Until then, stocks need to come off current levels and cool down. So I’ve picked out two strong pullbacks to trade right now — and more in Wednesday’s stock market recap.

But first…

Stock Market Recap

In this stock market recap, global stocks are mostly flat as the U.S. market continues its holiday-shortened week.

According to the put/call ratio, the market is fragmented and there isn’t much directional bias. Prices continue to move higher as the relative strength index moves lower. This is called divergence, and it has preceded pullbacks in the past. 

Only 52% of stocks are trading above their 50-day moving averages. So don’t be surprised if stocks pull back to their 50-day MAs or break down even lower.

I don’t expect too much upside from the Financials, Energy or Industrials sectors. The Health Care and Communication Services sectors look strong right now. If Consumer Discretionary can break its current resistance level, the sector could break out. Sectors overall, however, are showing fragmentation — which is another indicator for a market cooldown. 

Roger’s Radar: 2 Low-Risk Pullback Opportunities

Gilead Sciences Inc. (Nasdaq: GILD) is a biotechnology company focused on the research, development and commercialization of medicines. GILD had a recent swing high and dropped toward its 50-day MA. If the market continues to be choppy, there’s a good chance that GILD will regain momentum and move back toward its fair value around $72 per share. 

The second stock is a supplier of heavy building materials that is also pulling back to its 50-day MA. It’s had a strong upward trend for most of 2021. Now, I would get out of this trade if it falls below the 50-day MA for more than two days and let the stock ride up to about the $293 level. 

In this video, you’ll learn which sector is thriving… whether markets are choppy or trending higher… an update on overall market momentum levels… what 90-day breakouts and breakdowns are showing… and two low-risk pullbacks for choppy end-of-summer trading action.

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WRITTEN BY<br>Roger Scott

Roger Scott

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