In a good market, the IBD Breakout Stocks Index highlights stocks jumping out to nice gains. But in a market correction like we're in now, attention turns to stocks setting up new chart patterns and potential buy points as the stock market indexes search for a bottom and a follow-through day to signal a new uptrend.
Recent action in the IBD Breakout Opportunities ETF from Innovator Capital Management reflects this year's volatility amid heightened fears and uncertainty.
The silver lining to this challenging market is knowing that market corrections ultimately lead to bullish market uptrends. And that shift in market trend often happens when doom and gloom fills the headlines and investor psychology becomes excessively bearish.
That's why now — while the market correction has investors scared — is exactly the time to build your watchlist and prepare for the next uptrend.
See All Stocks On The IBD Breakout Stocks Index
Stocks Setting Up Bases And Buy Points During Market Correction
While it's risky to make new buys during a stock market correction, it's also foolish and costly to ignore the indexes while they're down. At any time, a shift from "market in correction" to "confirmed uptrend" can happen in as little as four days. By tracking the Market Pulse inside The Big Picture column, you'll see when a follow-through day occurs to mark that change in market direction.
And right when the indexes flash a follow-through day to mark the end of the market correction and the start of a new uptrend, the best stocks to buy and watch often begin to jump.
Currently, a number of stocks are setting up new chart patterns, buy points and buy zones. While mainstay growth stocks like Apple, Tesla, Microsoft and Alphabet do not currently earn a spot on the Breakout Stocks Index, several stocks on the BOUT ETF are setting up.
While looking through the names on the Breakout Stocks Index, keep an eye on their relative strength lines. A rising RS line, particularly one at or near a new 52-week high, is a sign of market leadership. It shows a stock is outperforming the S&P 500.
In this current market correction, several BOUT ETF stocks are in or a near a buy zone with a strong relative strength lines. Stocks fitting that bill include Pilgrim's Pride, Ingles Markets, The Chemours Company, Olin, Merck, Target, and many others.
For a full list, see the IBD Breakout Stocks Index.
Meanwhile, also keep an eye on IBD stocks lists, as well as daily updates to see which stocks just came on or off lists like the IBD 50, IBD Sector Leaders, IBD Big Cap 20 and IPO Leaders. You can also help build your watchlist during this market correction by creating custom screens with the IBD Stock Screener.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to essentially invest in the entire index in addition to or rather than buying the individual stocks. Learn more here about the ETF and Innovator funds.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
