The undercut & rally (U&R) set-up remains our most potent long-entry weapon in this market. Even as Investors Business Daily laments the lack of standard-issue base breakouts by leading stocks, scores of names are turning on U&R moves and posting decent run-ups. As stocks push up the right sides of potential new bases and approach new highs, they tend to lose momentum and may need some time to consolidate.
This sets the stage for some general market backing and filling. Today, the NASDAQ Composite Index closed down a hair on higher volume, so the action has the look of churning at the highs. This comes on the heels of yesterday’s move to all-time highs on a slight increase in volume. Some consolidating notwithstanding, the uptrend remains in force.
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