When markets sink, watch what floats. These are the basketballs under water: stocks showing strength in chaos. From defensive to high-beta, these six names are ready to shoot up once pressure lifts.
About a month ago, I wrote about the concept of basketballs under water.
With markets recently testing key support zones and showing signs of capitulation – such as elevated ETF volume, a spike in the VIX, rising put/call ratios, and 91% down volume days –, the peak pressure on some of these basketballs may now be behind us.
As a reminder, basketballs refer to stocks that are temporarily held down by broader market conditions but have strong rebound potential once selling pressure subsides. In this kind of environment, relative strength becomes the hallmark of a high-quality stock – the kind worth owning.
Let’s look at three defensive and three higher-beta basketballs which currently are being pushed under water.
Chart 1: Volume of the $SPY S&P 500 ETF; high volume at lows is a sign of capitulation
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