Good evening StockBandits!
The major averages were able to put together minor advances today to continue the rebound from Monday’s lows. However, the point gains were far from impressive and the volume was anemic to say the least. Add that to the fact that we’re still sitting beneath key levels (DJIA 12300, S&P 500 1294, NAZ 2887), and the bulls still don’t have much going for them from a technical standpoint.
It seems sentiment had grown quite poor with last week’s selloff, which I noted here on Sunday night, and so with prices having become short-term extended to the downside, we’re getting a minor lift as a relief bounce. The most important thing to recognize here though is that we’ve seen no change in character.
In fact, this bounce attempt on light volume is not unlike the previous bounce in late-May with the indexes unable to reclaim broken support levels along with a negative price-volume divergence. Anytime volume isn’t confirming the moves in price, it’s important to consider recent conditions, and right here that’s a recent downtrend with a small counter-trend move currently taking place.
My stance remains a cautious one until the charts warrant a shift. Bearish charts which had become extended are putting in rest and trying to reset with the creation of some new patterns, so I’m allowing those to set up. And while there are some bullish patterns out there, generally they are in defensive names. I want to be positioned on a net basis in the direction of the prevailing trend, and currently that’s down so I’m net short. I will play some longs as the right setups emerge, but until we’ve seen technical evidence that the market has stabilized, maintaining high levels of cash or being short appears to be the best bet.
I’ll run through a few of the indexes here and then share some new plays I’m eyeing.
NAZ – The NAZ remains shy of the 2887, which keeps the lower-highs downtrend intact for now. Price has rebounded slightly, but volume is poor to say the least and this appears to simply be a relief bounce before more selling kicks in. News could change that, but technically we’ve yet to see a shift in the character of this market.
SP500 – The S&P remains beneath 1294, which is a key level. Beyond that is the prior bounce high at 1335, leaving this index well shy of it. Volume is severely lacking on this bounce attempt, which elevates the odds that it will fail. Monday’s low was 1266, so it’s the next level to watch if sellers return.
RUT – The RUT is testing 746 from below here, which was prior short-term support. Lower highs remain in place, keeping the trend down.
DJIA – The DJIA bounced today in a very lazy fashion and on extremely light volume, which does not make this move trustworthy at the moment. It also remains beneath 12300 and the previous bounce high of 12611.
Charts of Interest:
Below are some charts of interest, from market leaders to example charts:
GOOG more than a week ago was highlighted here as it fell out of its large multi-month wedge, and I stated it seemed headed for $560. Price is still acting heavy and we could see this stock reach that level soon at this pace.
FAST is an excellent example of why waiting for technical levels to be cleared is so important. Last night this chart had a potentially bullish setup for a quick trade, but it never cleared the trend line. Instead, it tanked today, reminding us that getting in ‘early’ isn’t ideal.
Watch List & Short-term Setups:
Below are stocks which are starting to set up but which are not quite ready for multi-day plays. These may provide short-term moves if the levels highlighted below are crossed, but should remain on watch a bit longer for those with multi-day to multi-week timeframes.
AEM has held up well of late but others in this group (RGLD, GG, AUY, NEM, HMY, etc.) remain short-term extended. Therefore, I’m unwilling to take this one for a swing just yet. My thinking is that if the group pauses, this one will do the same, so this is currently just a setup for a quick play if it’s able to clear resistance at $41.
KMB is channeling near highs and may soon break out, but more work is needed before it’s ready. Definitely worth keeping on watch.
CCI is nearing the apex of this wedge and may soon offer a move. Watch the $54.60 level for an upside break to indicate a quick pop is starting.
VHC pulled back the past 4 sessions but has held above support from a few weeks ago. A turn higher here could deliver a quick rebound in price, but this is not a swing-worthy setup here since this pattern is still a bit shaky and needs to mature.
V seems intent on filling this gap so this is a stock for nimble traders to keep on the radar for a quick drop if the $111.10 level gets cracked.
New Swing Trades:
These are the stocks I’m setting up for new plays. I will wait for my trigger price before entering, and all stop and target levels are provided below. For those of you who are new here, please see the Swing Trading Strategy for more details on how I manage these trades.
No new swing trades tonight.
[table “289” not found /]Trades Overview:
This list is a look at our current & potential swing trading positions. Stocks we are already in have “triggered”, while those we are considering for plays have not triggered. Click post title to view print-friendly link.
SYNA stopped
Open Position Notes:
ORLY bounced again today but remains beneath my entry price so it seems to be testing that area from below. We also saw volume drop further with today’s advance, so I’m going to stick with this trade and see how it acts on the next decline.
GRA rested today, which is not a bad thing. This stock posted an incremental decline for the 2nd straight day, but overall is just resting so I’m going to stick with it and see if more selling kicks in once this pause is completed. It’s still a bearish setup so I’m staying patient for now.
Closed Positions:
SYNA triggered my stop loss today as it rallied sharply to a new bounce high, clearing recent resistance I was trading against. This took me out of the trade for a very small 1.8% loss, which is extremely manageable for a failed trade. I’m a little disappointed that after a couple of decent declines in price it wasn’t able to show follow through, but given the same setup again I’d still take the trade since the risk/reward was so favorable. I’ll leave it alone for now as today’s surge higher was simply not bearish.
Hi Jeff,
I did a little digging on SYNA since it was such a beautiful setup, not in the least the low risk stop, and looking at the chart could not get it why it reversed. Turned out they had a new product release this morning!
No way of knowing, but with a new product that got a response from investors so fast, we are probably very lucky to get out with such a small loss. Good lord, we were holding it over night, and between lights out and sunrise price can jump way over a stop.
You can watch out for the quarterly reports, but there is no protection from news and product releases. You can only be philsophical and expect that in the end as many go in your favor as against you.
Best regards,
John
Thanks for the info John, that’s definitely true. Just a part of the risk we take being involved in stocks, some will gap for us, some against, and so at the end of the day we just have to find ways to manage risk as effectively as possible and let the law of large numbers play out!