Happy Friday.
Our two closest targets were attained yesterday – 6,120 & 6,125, making it three straight successful patterns. The other was 5,840, which got hit a few weeks ago…
Uptrend Traits
The uptrend can continue as long as breakouts are followed through upon. In particular, the uptrend traits that we frequently cite have been playing out as well as we could have hoped for – with number seven being the most important – repeating the process.
With multiple pattern targets already having been achieved (for the SPX and hundreds of other indices, ETFs and stocks), it’s now about seeing the next digestive phase create new patterns.
1-Hold/create support
2-Follow through
3-Log a higher low
4-Construct a bullish pattern
5-Break out
6-Hit upside target
7-Repeat steps 3-6
Buying Overbought Stocks
Is it too late to buy? 🤔
Well, as we know, hundreds of stocks have experienced strong moves since the April lows — but there have been clear outperformers. 🚀
While reviewing S&P 500 charts recently, STX and WDC really stood out.
I flagged them recently on X with these bullet points:
🟢 26 S&P 500 stocks made new 52-week highs on Wednesday
🟢 Two were computer hardware stocks: STX and WDC
🔴 Both fell over 40% through the April lows
🟢 Both have rallied over 120% since then
🤯 The majority of their gains happened after getting overbought
My favorite comment on that post came from Shane Murphy, MBA, CMT, who said:
“Great work! The term ‘Overbought’ carries such a negative connotation. Let’s rebrand it as ‘Enthusiastically Bought.’ Much better semantics!” 💡
Shane makes a great point.
“Over” implies a ceiling — a hard stop. 🛑
But in trending markets, momentum often sticks around longer (sometimes much longer) than we think it can — or should. 📈
So… is it too late to buy stocks? 🕒
One metric I’m watching is this: how many trade ideas we’re recommending.
🗓️ In May + June, we shared 46 chart-based trades with clients:
✅ 45 buys
❌ 1 short
By early May, the S&P 500 was already well off its lows — yet many of those names had already rallied a lot.
Still, strength isn’t always a reason to sell.
In fact, names like STX and WDC pushing higher show clear momentum, not exhaustion. 💪
At some point the trend will shift.
But it won’t be just because the market is “overbought.”
The evidence is right in front of us.
Excellent. Long and strong