• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Textbook Case of Reversal Action Has Finally Hit

The key issue for reactive traders is to spot an intraday reversal and a poor close -- that will be the primary tip-off that further problems await.
By JAMES "REV SHARK" DEPORRE
Jul 13, 2020 | 04:45 PM EDT
Stocks quotes in this article: TSLA, QQQ

The market action Monday was a perfect example of what you look for to indicate a short-term market top. As I've been discussing, the key issue for reactive traders is to spot an intraday reversal and a poor close. That will be the primary tip-off that further problems await.

The intraday reversal Monday was exactly what we have to watch for, but what was interesting was that the setup for this was nearly perfect. There were a number of target increases in the FAANG stocks in the morning and Tesla (TSLA)  was trading much like Yahoo did back during the 1999 to 2000 internet bubble. TSLA ended up with a 300-plus point trading range and trapped legions of bulls that were chasing the momentum.

The reversals and selling pressure were also quite intense in some of the hot groups like electric vehicles and special purpose acquisition companies. Breadth ended the day with around 2,700 gainers to 4,650 decliners, which isn't bad, but it was the magnitude of the reversals, and not the point loss, that is the big issue. The Dow ended the day in positive territory, while the Nasdaq went from hero to down 1.23%. The Nasdaq 100 -- PowerShares QQQ Trust (QQQ)  -- was up around 2% to a new all-time high and then reversed to close down 1%. The only other time that has happened was on March 7, 2000, when the internet bubble burst.

The big question at this point is "what comes next"? Is it all downhill from here? There is no question the market has become frothy and extended and needs to work off some of the excesses, but much of what has driven this market has been very narrow. The average stock is not that overbought and that means there is likely to be some rotational action.

Also, keep in mind that this has been a market driven by stock picking. I'll be looking for nimble and astute traders to find other opportunities, but the more correlated the selling the more difficult it will be.

We will see tomorrow if the bears can build on this reversal. They have the advantage, but I expect that the dip buyers are already eyeing some names they want to jump on and will be providing some support.

Don't forget that earnings reports will start to hit with the big banks leading off. These reports will add an interesting element to overall market sentiment.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, DePorre had no position in the securities mentioned.

TAGS: Investing | Investing basics | Stocks | Bearish Bet

More from Stocks

The Mask Gets Yanked Off of Goldilocks Narrative

James "Rev Shark" DePorre
Sep 21, 2023 4:29 PM EDT

The bulls' story always sounded like a stretch, and now they will have to develop a new narrative to help drive a recovery.

Doug Kass: Risk Happens Fast. This Is All About to Get Real

Doug Kass
Sep 21, 2023 2:30 PM EDT

Caution and stock market congestion may lie ahead as interest rates stay higher for longer, while the stock market decline has now assumed a global character. Plus, more lessons from Howard Marks.

After Splunk Grab, Cisco's a Slam Dunk

Stephen Guilfoyle
Sep 21, 2023 11:54 AM EDT

I didn't like the idea of a cash deal at the start, but after going through the fundamentals, I think it's a wise move -- and here's why I'm adding the stock.

The Day After the Fed Meeting, I'm Gambling on This Stock

James "Rev Shark" DePorre
Sep 21, 2023 11:27 AM EDT

Here's why I like this gaming-related play, and why stocks could eventually offer some good entry points -- but not yet.

Whoa, We're (Only) Half Way There: Why the Correction May Have a Long Way to Go

Guy Ortmann
Sep 21, 2023 10:12 AM EDT

Four key indexes shifted their trends from neutral to bearish Wednesday.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:24 AM EDT BRUCE KAMICH

    This Could Get Messy

    A number of key stocks are getting close to import...
  • 01:41 PM EDT CHRIS VERSACE

    Latest AAP Podcast With Helene Meisler!

    Listen in as the Action Alerts PLUS podcast talks ...
  • 09:07 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The Most Common and Costly Mistake in Investing
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login