For those relatively new to trading that might figure today’s rally is “just too darn strong” to indicate anything less than the recent correction is over & was a great buying opp on the road to new highs & beyond, here’s a quick comparison of a couple of the final short-term buying climaxes that occurred on the first two snap-back rallies following the very similar impulsive 10½%, 8 trading session drop off the October 1, 2018 high (vs. the current 8½%, 6 session drop off the July 26th high).
QQQ Buying Climaxes Aug 8th
Those two big green short-term buying climax candles resulted in daily gains of 2.91% and 3.14% compared with a gain (so far today) of just 1.63%. That doesn’t mean that today’s candle will or must prove to be another near-term buying climax with the next leg down soon to follow, as was the case in both of those instances back then, but it does show that if this is merely an oversold bounce off support snap-back rally, then as convincing as it might be to some, those bullish should treat it with skepticism by placing relatively tight stops on any longs while those bearish might opt to take advantage of this bounce to add back any short exposure closed on or around Monday’s lows, with stops somewhat (1-4%) above.