Buyer Beware: Stocks Could be Set for a Dip

The market put in a fairly weak five days, but in looking at the chart below, it was pretty much expected.  My concern, however, is that when a stock or index forms an ascending triangle, the next big move is usually to the downside.  It’s not a lock of course, but I’d be careful about accumulating much on the long side.

I don’t mind buying on dips, but you can also buy on breakouts.  The strategy is to wait for a stock to take out resistance before buying.  You now have some momentum behind you and a logical spot to put your stop: right below the resistance that was just broken.  Waste Management (NYSE:WM) is a great example.

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Of course, dip buying also has some advantages and there I like to buy where there’s clear support.  Hershey (NYSE:HSY) is teed up for a purchase right now.

Back next week to see just how that triangle plays out.