Bargain Hunting for Stocks

Everyone is talking about last week's retreat in the Stock Market. But how bad was the week according to the charts? The Nasdaq 100 Index (NDX) pulled back 1.56% to a price just below it's recent price channel which begin in early November. On the weekly chart, the 30 period moving average acted as support at 1721. The S&P 500 Index (SPX) pulled back 1.14% to the 30 period moving average on the weekly chart. The price corresponds to a short 3 week consolidation area back in October & November. The Dow Jones Industrial Average Index (DJI) pulled back 0.98% to a price level that again reflects old resistance from early November.

Basically the Stock Market has reclaimed all of the market gains since November in a single week. It is widely known that "the market goes up the stairs and out the window". Welcome to just another window. Windows happen often, just look back to March '06 which wiped out 3-4 months profits.

So, what's next? All I can predict is that the market will move either up, down, or sideways. The charts tell us that the markets could be at an area of support. The technicals have fallen very quickly into the over-sold area. The volatility index has jumped up to level seen in May and June.

I think that it is a good time to do some bargain hunting for very strong fundamental stocks. These will be the first to rebound. My watch list would include stocks like Brush Engineered Materials (BW), Allegheny Technology (ATI), Navistar International (NAVZ), General Cable Corp (BGC), and Goodrich Corp (GR). These are some strong fundamental stocks in currently strong industry groups that have fallen to areas of support.

Always remember to trade carefully and know your both your upside targets and your downside escape plan.