Those that have missed out on the steel and energy run are in a frustrating position. There is the fear of being left out as the stocks continue to run. However, there is also the fear of “chasing” an overbought stock that’s ready for reversal. Which “fear” should you listen to?
I’m listening to the latter. As we all know, stocks don’t go up in a straight line. Even the best of them pullback, and that’s what a prudent trader will look for here.
Take a look at CLF and pay attention to the stochastic readings after the stock has made big runs. In every case, the stock pulled back to a better entry point. I am looking at the 130-135 range, as this is where the stock broke out and we see price support.