Stocks are rebounding and Treasury yields are popping just a single session removed from one of the worst drops ever. This time, it’s a $1 trillion proposed stimulus package that’s got the market rising.
President Donald Trump even floated the idea of a cash disbursement to Americans, to boot.
It was a day full of surprises – welcome ones – for coronavirus-weary investors.
Analysts are liking the moves as well, but some still believe that the federal government needs to release more policy information before bulls come flooding back.
“We know there’s going to be monetary policy. We know there’s going to be fiscal policy and we’re hearing more about that. That’s two legs of the stool,” said Art Hogan, chief market strategist at National Securities.
“The federal health care policy response, that’s another one. I still think the information on that needs to get better.”
Hogan continued, adding:
“We’ve done a lot of recalibration of equity values, all based on an assumption of how much economic damage is done, but we won’t know exactly how much damage for a period of time. One thing I’m sure of is the markets will have found a bottom long before the news starts to get better.”
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It’s an interesting take on one of the market’s biggest questions:
When will stocks hit the “bottom?”
To Hogan (along with other fundamental analysts) it’ll happen when sellers finally exhaust themselves, not because of a coronavirus breakthrough.
And even though we don’t typically approach trades from a fundamental perspective, I’m inclined to agree with him on this point.
The crash will eventually run out of spit, with or without a victory over COVID-19. Stocks went up today, prodded along by some fiscal maneuvering from the government, and who knows; maybe the bottom’s been found.
Maybe this is where the next rally starts.
Or, conversely, stocks could plummet once again. What investors need to be looking for in all of this is a consistent string of positive trading days (possibly weeks). Only then will it make sense to re-enter the market wholeheartedly.
However, that doesn’t mean there will be a lack of trading opportunities until that happens.
Case in point, take a look at Luminex Corp. (NASDAQ: LMNX), a biotech company that’s soaring.
In the daily candlestick chart above, you can see that LMNX has experienced some absolutely wild volatility over the last few weeks. The stock peaked just over $29.00 in early March, only to crash then rise again.
Now, it’s trading right at that early March high after another huge session today. If LMNX can bust through key resistance from that high, it could go on another preposterous run in just a few short sessions.
Thus far, LMNX has already broken out above its minor bearish trend (represented with the yellow trendline). Should the stock trade above today’s high, it might make sense to go long with a trade rigger of $29.35. The stochastics indicator, while just below overbought territory (80 or above), isn’t perfect, but it won’t stop us from taking a long position here.
Best of all, LMNX has had a mind of its own and operates mostly independent of the general market. Chances are a massive short-term trade could develop in just a matter of days while the coronavirus outbreak remains a problem – something that should only push LMNX shares higher.