Anatomy of a Broken Momentum Stock – Bad Signs For Market

I am seeing a lot of momentum stocks which have broke down below their trend lines. CPLA is a good example. During the trend, the stock has continually bounced off either the 20 day or 50 day moving average. Just as important, down moves have not shown much distribution.

That’s not the case right now. We’ve seen a high volume move below the 50 day moving average, and volume continues to show a negative pattern.

The fact that there are so many momo stocks that look like CPLA means one of three things:

1- new momo leadership is emerging.
2- the market is going to tank
3- correction that will resume.

The most likely possibility is 1 or 2. I have a feeling it might be 2, because the negativity cuts across so many momentum plays and sectors.

One thought on “Anatomy of a Broken Momentum Stock – Bad Signs For Market

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  1. another fact is everytime the market has tanked it only bounce back up along making new highs with former leaders aapl goog as an example once again and also cpla has not broken all it`s major support area`s neither has aapl or goog. And the people who bought into the pullbacks made a lot of money to the upside take a look at aapl and goog for an example.

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