Light Volume Breakout – Be Careful

March 30, 2023
Author: Peter Stolcers, Founder of OneOption

The buying has not been aggressive and that makes this rally vulnerable. Day trade it but don't swing trade it until we see some volume.

PRE-OPEN MARKET COMMENTS THURSDAY - The S&P 500 is up 25 points before the open and we are adding to the gains from Wed. It broke through the 50-day MA and the High- trendline on very light volume. Overseas markets were generally strong so the back drop this morning is good. End-of-the-month fund buying could help to push the market higher and equity inflows have been high the last few weeks. Light volume rallies can be day traded, but I would not trust them for swing trading. These gains can easily be stripped away with a bad headline from the banking sector. We know from the price action yesterday that this is not a market that you have to chase. The price action was very compressed and there is no reason to believe that it will change. In the chart below you can see that the market is not going anywhere fast. We do have multiple technical breakouts so we should favor the upside. That does not mean you should buy aggressively. We have seen two-sided action. Wait for market dips. You will get one at some point today. If the gap up hits resistance, watch the pullback. You want most of the gap preserved and you want mixed overlapping candles during that drop and light volume. If you have all of these elements and you see a bullish hammer, tails or a bullish engulf, you know support is forming. If that coincides with a bullish 1OP cross you have a nice window that you can trade from the long side. This is our best scenario in the first two hours today.

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