Good evening StockBandits!
Stocks tested the downside last week with a harsh decline Monday and another Thursday morning before turning sharply higher from there. A late-day lift on Thursday was followed by a big opening gap to the upside Friday as the market celebrated positive news from the European Union. We then saw some continuation Friday with a steady climb, taking the indexes out at their best levels of the week.
While the more speculative RUT has already cleared its highs from mid-June (which is quite positive), the Big 3 indexes each now sit just a short distance from their respective key levels. I’ll highlight them on the charts below, but they include DJIA 12876, S&P 500 1370, and NAZ 2946.
The recent pullback finding buyers is obviously very positive for the market, particularly in the face of what has generally been poor news. The stock market tends to hate uncertainty, and we’ve had a ton of it lately. Despite that, stocks have held up extremely well and now have some technical positives going for them too. Most notably, the pair of short-term higher lows we’ve seen since the early-June low. That points to dip-buying taking place more than once, which is not to be dismissed as irrelevant. Should we happen to see the indexes close back above the resistance zones they now face, the next stop could be the highs from April.
Since closing out GRA and SYNA early this month on the short side, I have listed only 2 potential shorts as swing trades and neither triggered entries. My focus has been on the long side, and while some trades have required some patience (or failed like NEM), generally that’s been the side which is paying off. I expect to continue focusing primarily on longs (with some occasional short candidates) for as long as the market continues to show technical reasons to do so. Right now we’re working higher and seeing weakness get met with bids, even in the face of great uncertainty in the news flow, and that’s a reminder that the price action trumps all else.
I noted here last week that volume is usually the lightest during July 4th week and Thanksgiving, and so it’s imperative to trade smaller this week with that in mind. With thinner markets comes greater slippage, so stay selective this week with that in mind. I will have a Broadcast on Monday night and Tuesday night (for Thursday’s session) since the market is closed on Wednesday.
FYI, here’s a link to a short video interview I gave recently at the Traders Expo in Dallas on Why Copying Trades is Asking for Trouble. As subscribers here you might find that title confusing, but the fact is that I’m simply sharing my trading plan with you here and you’re to derive from it something useful you can integrate into your own approach. The primary point is that even when receiving trade ideas from another source (such as here), it’s important to always understand the reasoning behind the trade. Only then can you learn something useful from it, which is why I outline my reasons and game plan for every trade listed here.
I’ll run through a few of the indexes here and then share some new plays I’m eyeing.
NAZ – The NAZ faces 2946 this week, a level which has served as both support and resistance in recent months. However, it’s just seen a big upside reversal since Thursday mid-day, so a little rest soon may be needed.
SP500 – The S&P rallied big at the end of last week to get within spitting distance of 1370, the high from May 2011 and a level which has been support & resistance several times since then. That’s the next big test for the bulls after creating a couple of higher lows in recent weeks (small green underlines).
RUT – The RUT held another higher low last week and then vaulted higher to leave 784 in the rearview mirror. This small-cap index has lots of room to run now.
DJIA – The DJIA incrementally cleared 12876 last week, paving the way for higher prices in the coming weeks after creating higher lows in June. Next resistance is at 13300, although with the news flow it’s unlikely to be a straight shot there.
Charts of Interest:
Below are some charts of interest, from market leaders to example charts:
RYL is showing exceptional strength here after some recent hesitation. Many homebuilders are now back in rally mode but look like they need some rest soon.
AAPL is a few points from the upper boundary of its range but Friday’s lift certainly helped the NAZ.
EAT is caught in a high channel here. In the short-term, the moves will be limited until an exit is made, but eventually this could serve as a nice base for higher prices. This is a good example of how the chart should align with your timeframe for a trade.
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.
FSLR pulled back a bit last week but may turn higher again soon. If it takes place on Monday, I like it for a momentum play through $15.50. This stock may not ever fully recover, but it’s showing some improvement of late and that means the buyers are in control for now.
LXK is just clearing resistance here and could offer a momentum play if it’s able to continue and play a little catch-up. This is not a headliner stock, so it’s not uncommon to see stocks like this make up some ground after lagging slightly on banner days like we saw on Friday.
ALXN is rallying up to short-term resistance here and may produce a pop if it can clear $100. This is clear resistance but a sloppy base, so I don’t trust it for a multi-day move.
FOSL is facing multi-week resistance here but could see a nice lift to squeeze some shorts if it’s able to get past $77.80.
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 candidates tonight.
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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.
CINF & UPL stops tightened
Open Position Notes:
CINF saw a very positive day on Friday to lift it to new highs on strong volume. After gapping higher, the stock continued to rally and went out at its highs of the day. This enthusiasm is what I’ve been waiting to see, so now I’ll watch for some follow through. I think this move warrants an adjusted stop, so I’ve done that.
NFLX has lagged but still looks very bullish on the daily chart here so I’m sticking with it. This one is back to my entry zone, and now I’d like to see it make a new high since my entry to get a better gauge on momentum. This has been a healthy rest for the stock, but if it doesn’t go soon I’ll likely start to tighten my stop.
UPL continues to act well here, both with the price action and the strong volume which has accompanied it. A little rest would not be surprising at this point, which I’m fine with given that I’ve already taken partial profits at Target 1. That said, Target 2 is not far away, so I certainly wouldn’t mind seeing it take me out up there first.
JBHT hesitated initially to turn back up but my thesis for the trade is playing out well so far. The stock is gaining momentum and volume is starting to confirm that, so I’m now watching for some follow through toward Target 1.
Closed Positions:
No closed positions.
