After selling off all morning we are finally seeing a little bounce, but this is typically not the sort of market action that leads to a strong close. We have selling across the board with the momentum stocks showing us that momentum works in both directions. When we have this sort of pressure, bids just disappear and the bottom fishers bide their time.
My main strategy in this sort of action is to start thinking about stocks that are likely to have a good second quarter. They should start to see some interest as earnings news approaches. Two such names I have on my watch list right now are audio tech firm Turtle Beach (HEAR) , and Casa Systems (CASA) which was a hot technology play that has been under pressure due to the expiration of lockups. I think both will see interest into earnings but that is still a few weeks down the road.
The bigger issue in the short term is whether something will happen to relieve the pressure from the trade war worries. The market was quite optimistic for a long time but now it is no longer so certain that Trump is going to back off. It is creating some gloom that has not existed for a while. This time the headlines actually do matter.
I'm excited about the opportunities this sort of selling is creating but it is important to stay patient. It is often better to be late than early when buying into downtrends. The idea is to buy stocks that are trending up rather than down.
This action is ugly today but it is necessary and will lead to some good opportunities for traders that stay focused on finding quality names.
