After a big drop like the one that occurred on Friday there is a tendency for some bounce action the next day as traders try to catch some bounces. As a downtrend develops, these bounces can fail quickly but quite often they persist long enough to cause market players to believe that the worst is over. The longer the bounce lasts the more likely that buyers will grow impatient and start doing some buying.
When we have this sort of drop and bounce action, the key technical level is the low hit the prior trading day, which in this case is around 3215 on the S&P 500. That is where sell stops are likely to be set so if that level is breached the selling pressure will likely pick up sharply.
The bounce this morning is quite lively with about 5200 stocks up versus 1975 that are down. There are more new 12-month lows than highs but both numbers are quite small.
The bulls are hoping that this dead cat bounce transitions into a V-shaped bounce. Last week there were two similar dead cat bounces that eventually failed and led to the big drop on Friday, so there will be many people doubting this action. So far they aren't doing much.
I'm seeing quite a bit of good action in individual stocks like Cassava Sciences (SAVA) , Reata Pharmaceuticals (RETA) , Apellis (APLS) , Spartan Motors (SPAR) , and others.
One new buy I've made today is DBV Technologies (DBVT) which competes with Aimmune Therapeutics (AIMT) . AIMT received FDA approval of its peanut allergy treatment. DBVT is developing a competitive product in the form of a patch. The company did a secondary last week at $10.25 and I suspect it will find interest as AIMT works on commercializing its product. I suspect that the overall market for peanut allergy treatment may be bigger than some analysts suspect.
