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Why Pullbacks are a Must

Hey, Ross here:

Welcome to a brand-new trading week. As always, let’s review what happened last week – and where I see the market heading from here.

Chart of the Day

After a big move higher the previous week, stocks traded mostly flat last week. The Nasdaq fell 2.3% on Thursday which wiped out the gains from the first half of the week.

You likely saw some of your positions pull back this week. Let me reassure you – this is normal.

Stocks do not go straight up. 

Even in the best conditions, they stairstep their way higher in a series of higher highs and higher lows.

That means there are multiple pullbacks within the uptrend.

And as the chart above shows, we are also trading up against the final supply zone.

When I say “supply” I am simply referring to areas where a large number of sellers are likely to sell. They are offering shares for sale and thus creating supply.

Anyone who bought at the end of 2021 has been underwater for a year and a half. The thought of getting out at break even is going to be appealing, especially after such a hard and fast run.

I expect to see a shallow pullback in the next 2-3 weeks. I could be wrong. But based on past bull markets, this would be more than warranted at this level.


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Insight of the Day

Be careful of market rallies with NO pullbacks.

Imagine buying into the beginning of a rally – only to watch it go straight up.

No pullbacks or anything – just a straight path to the top.

Sounds good, right?

Wrong.

A rally without any pullbacks is usually nothing but a speculative trap. 

It’s a false rally that will likely soon come crashing down – taking the hopes (and money) of those who got sucked in along with it.

You see, it is both healthy and necessary for growth stocks to occasionally pull back and “reset” before continuing their move higher. 

Investors trading on excessive margin and impatient amateurs who are chasing gains need to be stopped out so that supply and demand can again even out.

Wildly speculative activity leads to crashes (look at the 2000 dot-com bubble to see what I mean). And that is the last thing we want to see.

In my opinion, 10–15% pullbacks are the norm in a healthy bull market, and I look at them as opportunities to buy leading stocks that are holding up the best.

That’s exactly how I’m shifting my breakout strategies right now.

If you want in, I’ve got all the details for you here.

Embrace the surge,

Ross Givens
Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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