The Retest Is Here. These Are the Setups I’m Buying
The market is healthy. Risk rewards are interesting. So we should be buying it.
Over the past few weeks, my base case has been pretty consistent: either a healthy range or breakouts followed by healthy retests.
We should be moving from a downtrend to a fight between sellers and buyers - a range. I struggle to see sellers being stronger now considering the environment, but we shouldn’t rule it out. And I struggle to see buyers overwhelming sellers right away, but that is more likely than the contrary.
My expectation remains a range, as it has for weeks. But I am now more confident about the outcome direction of that range - higher, and its length - few weeks.
I didn’t expect the market to go straight up.
Even though that was a possibility, from a risk management perspective I preferred to let the market prove itself before getting aggressively involved. A healthy uptrend remains my base case today. Not yet confirmed, but increasing confidence.
The important part is that we are now getting what I wanted to see: a retest.
Most of the companies I have been covering broke out, proved their strength and are now coming back to test support. Volatility is violent but the trends remain largely intact. We now need buyers to step up on those supports and confirm my opinion of an healthy uptrend starting by doing so.
The S&P is the clearest example.
We had almost two months of range while funds worked at liquidating Leopold, followed by a breakout to new all-time highs once it happened.
After a move like that, I expected traders and holders to take profits or simply get out.
At this point, I see two major liquidity pressure points left:
Citadel and traders offloading some positions on pumps, which could put some pressure on these names - and the global growth market.
Retails and funds now buying back great fundamentals on great earnings and a healthy environment - except for Iran, cleared of most leverage and risk now that valuations have taken a large dump.
I’d expect the second to be the strongest, but I’d also expect the first to give buyers a a hard time short term.
That isn't a bearish chart. It’s what you want to see after a strong move higher.
The Nasdaq is weaker because it was more exposed to the liquidation, but it is still ranging between its previous high and its W21. Undecided, yes. Bearish, no.
If the market is indeed going higher, this is close to the best risk/reward.
You don’t chase a stock 30% above its support. You buy names that have proved they can move higher at levels where buyers should step in. We already have winners from the previous moves, some held for months like Soitec and Silicom, others bought during the latest bounce like AAOI, Harmonic and UiPath.
And earnings continue to confirm what matters: AI spending is translating into real demand, revenue and returns - proof 1, proof 2 and proof 3.
We also got another confirmation this week. Anthropic and OpenAI continue to grow revenues and ARR at double digit QoQ, with no evidence of the “slowdown”, circular financing or bad economics that have been used to justify a bear case for years now.
I have no doubts that we’ll have a bubble and that it’s forming.
But I believe the best is yet to come, not behind.
So what am I buying?
The market is giving us what I’ve been waiting for: retests.
It needed to digest the move. Strong names needed to come back to support. Traders needed to take profits and short. New buyers needed an opportunity to enter without chasing.
That’s healthy.
Some of today’s moves look violent, but I’d much rather have this than another straight-line move higher.
This is where you respect the system, no matter how hard it feels. That’s why you have one, to avoid making decisions on emotions and bias, and to buy based on concrete data and setups.
You don’t need to know whether the S&P goes up or down tomorrow. You need to know which setup offer the best risk/reward and how much you risk by taking it. If it fails, it’s alright. Can’t win them all. If it works, you’ll look back at this moment as one that shaped your year to date performance.
So let’s go through the best setups.
