Can We Buy CNX’s Pullback?

Ronald wants to know if I consider the 3.7% drop in CNX, a stock I highlighted earlier in the week, a buyable pullback.

While I would not buy just yet, the stock is still technically sound. Support has not broke and volume on today’s decline was within the stocks normal range. OBV still looks good. Ideally I like to see pullbacks head to support slowly and with small price bars, so I won’t buy until I see more evidence that backs the idea that today’s decline is nothing to be concerned about.

Another concern for this stock is the negative RSI divergence. This is a sign that momentum is waning. I don’t use divergences as a primary tool, but they do go into the overall analysis and let me know that I must exercise caution.

This analysis does not cause me to discard the stock from my watchlist. As long as support holds, it’s still a bull candidate. However, it does effect my entry. I enter stocks in one of two ways on pullbacks. When I am supremely confident in a stock, I will enter during the pullback, before a confirmation move like a bullish engulfing or long tail candle at support. My other method, when there are more queston marks, is to wait for confirmation.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at WordPress.com.

Up ↑

%d bloggers like this: