There is no question that the general markets have been correcting for a few weeks now, and the possibility of lower prices is not trivial. However, despite the recent weakness in the markets, there are still pockets of strength to be found for traders who look hard enough. This combined with a market that is starting to get oversold creates the possibility of an advantage for swing traders. In fact, the markets have already started a bounce attempt and traders need to watch how the markets react to the first push back lower in the next few days.
The markets gave back some gains after the Fed announcement on Wednesday and may see some follow through in the coming days. However, the markets did not break down yet, and the possibility still exists for more upside on the current bounce attempt. As always, traders need to keep an open mind to all possibilities. That being said, what better way to screen for strength, than to find stocks near all-time highs?
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Becton, Dickinson and Company (NYSE:BDX ) for instance is less than 10% from its all-time highs and just survived a test of its prior breakout near $84. It is consolidating near this level and has held above the prior base and 50-day moving average the past few weeks despite general weakness in the markets. The key level to watch is the recent lows set in June in case the markets continue to weaken. If BDX can maintain above these lows, it could set the stage for a push to new all-time highs.
Ascena Retail Group, Inc. (Nasdaq:ASNA) is another stock perched just under all-time highs. While it appears to be backing down from the $33.50 level once again, it remains well within the base it has been building since February. Traders should monitor the bottom of the base near $30-$31, but the key level to watch is above near $34.21. A close above this level would put ASNA back to new all-time highs and may spur a new up leg. (For more, see Buy High, Sell Higher.)
Carbo Ceramics, Inc. (NYSE:CRR) experienced a sharp gap higher in late April that propelled it to new all-time highs on huge volume. While it failed to follow through, it had been consolidating in an orderly fashion as it drifted back to fill the gap. CRR attempted to clear the channel it had been following on Wednesday, June 22, 2011, but failed to close above it. It now has a failed breakdown out of the channel below $140 to go along with the failed breakout. The next move to either side of those spikes should be the real one and likely lead to a good trading opportunity. (For more, see Channeling: Charting A Path To Success.)
While each of the stocks mentioned has been somewhat backing away from their recent all-time highs, Questcor Pharmaceuticals, Inc. (Nasdaq:QCOR ) has not. It is firmly pressed up to its all-time high just over $24. While the first breakout attempt a few weeks ago in May failed, QCOR never followed through lower, despite weakness in the markets. Instead it has been flagging tightly, revealing an underlying bid by market participants. Traders should closely watch the recent highs near $24.50 for a possible breakout above its all-time highs near $25.
The recent correction had pushed over 80% of stocks below their 40-day moving averages as of a few days ago. This is certainly wide spread and many leaders have succumbed to the selling pressure. However, there are stocks that continue to act well, and these are the names to focus on when the chance for market strength exists. The markets may break down again, and if they do, these setups will likely not trigger. However, they have held up so far, and if the markets continue to attempt a rally, then these stocks may push to new highs. (For more, see Blending Technical And Fundamental Analysis) Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.