3 Proven Ways To Identify A Potential Market Bottom

Source: moneyandmarkets.com

With day-to-day market volatility at incredible levels, it can be quite risky to pick a market bottom. But here are 3 top technical signals to help you reliably know when stocks may be forming a significant bottom.

Waiting for a Market Bottom

The trading system used in The Wagner Daily is focused on catching explosive moves in growth stocks that can run 30-50% or more in a few weeks to months.

This system is quite effective when trend conditions are ideal, enabling the model portfolio to generate consistent profits.

Then, when the market suddenly reverses lower, our market timing model automatically shifts to a nearly full cash position.

This rule-based system enabled our subscribers to quickly shift to cash and avoid the massive losses the stock market has recently sustained.

For more advanced traders, the newsletter also selectively picks low-risk entries to sell short a stock or major market index–especially after a short-term market bounce into resistance.

With the market still in a nasty correction, our model portfolio remains mostly in cash. However, we are now closely monitoring for signs that the next bull market may be approaching.

Below are three of the most reliable technical signals we look for to help identify when a tradeable, intermediate-term market bottom may be in place.

3 Top Signals of a Potential Market Bottom

1. Monitor the $VIX indicator to break down below its 50-day moving average

Extreme levels in the CBOE Volatility Index ($VIX) indicate that price volatility is high.

While high market volatility can be excellent for intraday traders, extreme levels in the $VIX makes it quite difficult to place reliable swing trading stops–typically 4-8% below a valid entry price.

After a significant market correction, watch for the $VIX to break down below its 50-day moving average, then continue to trend lower–setting lower highs and lower lows on the daily chart.

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Disclaimer: Past results are not necessarily indicative of future results. There is a high degree of risk for substantial losses in trading securities. All data and material on this website and/or ...

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