Stocks that are in a pullback have a variety of terms applied to the price action, like “Knife Catch”. No matter how you define it, the process has one common goal: to find a bottom for price to find a new long entry.
In order to find a bottom, you must have a variety of elements within the stock chart that help increase the probability that the bottoming process is in its final stages – I refer to this as the “stakes in the ground” process.
For a current example of a stock that is in this process, I bring you the Daily chart of $WPRT (Westport Innovations):
- The pullback from 50 has been significant in a short amount of time (with volume confirming)
- 50 day moving average way above and rolling over
- RSI is bottoming near the oversold level of 30
- The Stochastics are also trying to bottom
- Price is sitting on top of the 200 day moving average
- Price hovers just above a key Horizontal Support line