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Spike in volatility creates 'trader's paradise'

Trader on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters
Trader on the floor of the New York Stock Exchange.

The market selloff will likely take time to stabilize, suggesting more volatility may be on the horizon, according to Oppenheimer's Ari Wald.

"Historically, nonrecessionary downturns tend to be sharp and brief, but they still require time to stabilize," said Wald, head of technical analysis.

Based on his analysis of comparable "nonrecessionary, secular bull" corrections since 1962, defined by market drops greater than 10 percent, Wald found that it took the S&P 500 two to six months to recover.

In each of the seven instances from his study, the S&P index retested the lows before forming a base.

Here's how the technical analyst suggests playing this trend:

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