The current market has been punishing the vast majority of stocks as it corrects a rally that stretched over a year in length. Corrections are healthy for the markets and there is no denying that they were getting ahead of themselves a few weeks ago. While the chance for a much longer and deeper correction exists, there is no evidence yet that this is nothing more than a typical run of the mill correction. Unfortunately for swing traders, there really has been little to trade on the long side, and even shorting opportunities have been difficult with the constant ridiculous gaps every morning in both directions. Many former market leaders have been punished, and the majority of stocks are trading below some major averages. Currently only 50% of stocks are over their 200 day moving averages and only 20% are above their 40 day moving averages. With that in mind, I decided to run a scan to find the few stocks that are still trading above these moving averages as one way of finding stocks showing relative strength in this environment.
Rubicon Technology, Inc. (Public, NASDAQ:RBCN) is one of these stocks and is looking pretty decent as it consolidates in a triangle near all time highs. This is one of those charts that you could find all the time a few months ago, but have all but disappeared recently. If the markets can find some support here, this could end up clearing this base.
Funny enough, plastic shoe maker Crocs, Inc. (Public, NASDAQ:CROX) is another stock that has held up very well through the past few months after a brutal correction through the bear market. Maybe it was unfairly beaten down before, or maybe plastic shoes are back on the upswing, but this stock has respected $8.50 as support after clearing a long base back in March.
Sapient Corporation (Public, NASDAQ:SAPE) is another stock that has managed to stay in a consolidation throughout the recent market weakness after clearing a base earlier in the year. SAPE has found support near $9.00 on a few occasions and just reclaimed its 20 and 50-day moving averages. It looks like SAPE is on its way to testing its recent highs and top of the range. SAPE is actually trading at multi year highs and above a very long base on the weekly charts. Any move above these levels could lead to a squeeze higher.
While the market is not out of the woods, focusing on the strongest stocks will often pay off for traders. It's one thing to buy beaten down stocks as investments in long term accounts, but for swing trading, its a very difficult game to catch falling knives. These stocks have held up through recent weakness, and could benefit from a market bounce.
Good Trading,
Joey
