When A Bottom Is THE Bottom

If I could be granted one wish in the stock market, it would be that I could see every key bottom in price, whether it's the S&P 500, an asset class, or simply an individual stock.

What a super power that'd be! Well, unfortunately, none of us are blessed with that super power, but we do get some hints about bottoms if we care to pay attention. To give you an example, I believe Enphase Energy, Inc. (ENPH), a renewable energy company ($DWCREE), has bottomed. First, it appears that we've seen not one, but two exhaustive-type candles over the course of the past 7-8 weeks.

Enter Enphase Energy, Inc. (ENPH)

Exhaustion gaps typically are gap downs after extended periods of selling that show reversals and extremely heavy volume. ENPH's last two gap downs fit the bill. Both have seen reversals after massive volume gap downs and here's the kicker. Nearly every daily candle over the past two weeks has seen a close in the upper half of the day's trading range. That has resulted in an AD line that is at its highest level in nearly 3 months. The current trading range is roughly 34-48. If ENPH can break out of this range to the upside, I believe the bottom is confirmed. Of course, only time will tell for this beaten-up stock.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.