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Most breakouts are still not working well. On the contrary, we continue to see quite a few failed breakouts that lead to quick moves lower. High-momentum stocks seem to be targeted one by one. A few weeks ago, we talked about SHOP and ROKU standing tall in an ocean of red. Since then, they were demolished. Last weekend, we talked about CVNA holding above its 50dma but starting to crack – it dropped 22% this week.
The price leaders have been typically defensive, high-yield stocks like utilities, consumer staples, REITs. Also building materials and homebuilders. Maybe this is just another rotation in an ongoing bull market. Maybe, it is more than that and we will see the major U.S. stock indexes drop below their 50-day moving averages. All I know is that the majority of long setups I took in the past month failed and almost every single short setup I took (via put options) has worked really well. Until that trend changes, there is no need to be aggressive on the long side.
There is no need to guess when a better trading environment for long setups will return. The future momentum leaders will break out ahead of the indexes. We will see breakouts starting to follow through and pullbacks bouncing.