After being on the verge of falling apart Monday afternoon, the market registered a second strong up day and is on the now on the verge of confirming the rally attempt started April 15th after a heavy, above average volume reversal off the two hundred day moving average. The Dow, New York Stock Exchange, and SP 500 are withing one percent of all time highs, and the NYSE advance/decline line has been leading into new highs.
Leading growth stocks finally outperformed and started to round up cup shaped bases and add to recent gains. Zillow (Z) which failed its cup and handle base breakout just two day ago, broke back above the original pivot point in higher, well above average volume. Smith and Wesson (SWHC) broke out of a cup and handle base, and Western Refining (WNR) followed through on its cup and handle breakout Monday. Skechers (SKX) and Apple (AAPL) added to their break away gaps on earning's reports.
Reviewing the trading action over the last two weeks, there have been some scary days and a lot of shakeouts, but little distribution. Price volume favors a continuation of this rally. The only missing piece is more follow through by leading growth stocks bouncing off moving averages. That could change over the next three days with major headlines expected out of the Fed, Fed meeting and Janet Yellen Speech, and economic reports, GDP, and ADP and Monthly Unemployment Report.
Traders should have established a long position or two as leading growth stocks started bouncing off moving averages and use quick shake outs as opportunities to enter new positions unless recent positions start triggering initial or tightened stops. If this is real, leading growth stocks will keep following through on recent gains. Otherwise, keep tight stops to protect from more serious losses if the rally attempt fails.
Lannett Co (LCI) has appreciated almost 1,000% in just over a year after breaking out of a cup and handle base in January 2014. The stock is currently attempting to shape a third stage cup shape base and is starting to breakout from the bottom of its base.
Jazz Pharmaceuticals (JAZZ), after almost tripling since breaking out of a cup and handle base in May 2013, is now in the process of forming a second stage cup shaped base. The stock has setup to move up the right side of the cup shaped base.