Good evening StockBandits!
The market went higher for yet another Tuesday – what else might we expect? The Tuesday effect is either an incredible coincidence or it has become a self-fulfilling prophecy, but whatever it is it just keeps happening. Today’s advance by the DJIA marked the 19th straight advance on Tuesdays. For the S&P 500, today marked the 9th straight Tuesday advance, making that index 17 of 20 on Tuesdays for calendar year 2013. Those are impressive stats no matter how you slice it.
Today we saw the indexes lift once again after just a single day of rest on Monday. Early in the session, it appeared as though we might actually see some follow through selling as the averages each moved into the red. However, the minor dips (NAZ & DJIA were each down about 10) were aggressively bought and stocks rallied steadily into mid-afternoon before cooling off slightly into the bell to finish modestly positive.
I was taken out of one swing this morning (CRI which was reduced to a partial position after previously reaching Target 1), leaving me with just a single swing position on as of tonight. That’s quite light, but the fact is that with the market having just run in a straight line more than 10% in just over 4 weeks, very few names have been able to avoid becoming extended. As I’ve noted lately, the big concern isn’t that we suddenly come crashing down, but simply that short-term support levels are nonexistent after a nonstop move like this.
My aim is to remain selective based on the lack of current setups and the stretched condition of the tape. As more setups arrive, I’ll certainly share them here, but I won’t throw caution to the wind and lower my standards simply for the sake of being “in” this market. I’ve made that mistake before. The year is long and plenty of opportunities will in due time arrive, so there is no need to chase this extended market. Just a few days of rest would do wonders for the number of available plays, which I believe would offer far better risk/reward profiles than what I’m currently seeing.
Let’s get to the charts.
NAZ – The NAZ made an incremental new 52-week high today by finishing atop 3500, holding inside this steep uptrend channel. About the only thing to watch here would be a break below it to indicate some profit-taking is kicking in. This index has posted gains in 18 of the last 23 sessions.
SP500 – I wouldn’t necessarily say the S&P 500 is “struggling” here but it is challenging the upper channel boundary. The last time it did so was earlier this spring, and rather than seeing a deep pullback we simply saw it move laterally for a few weeks. Should price happen to stall out, we might see some profit-taking but given all the persistent strength it’s likely we’ll see this index churn laterally for a little while instead of falling apart. Nothing is out of the question, but the bulls aren’t likely to turn their backs quickly when they’ve been paid so well to buy every dip going back to November.
RUT – The RUT ended the day incrementally higher but didn’t make any meaningful progress. It continues to hold its rising channel as well, and a move beneath 990 would open the door to some short-term selling with a break of the lower channel line.
DJIA – The DJIA is also comfortably holding inside this uptrend channel, although it is not quite as steep as the others. A move beneath the lower trend line could spark some profit-taking, but there’s plenty of room for this index to retreat without doing any technical damage. In actuality, a dip could instead create a higher low and help to perpetuate the rally.
Notable Names:
TXRH looks good here based on price alone, but when volume is considered it removes trust from the setup. When price moves laterally like this it’s natural to see volume decline somewhat, and that can be good to an extent because it allows for volume expansion on a breakout. However, this is extremely light and the lack of liquidity here makes this chart of less interest for now.
LGF has validated short-term resistance in recent sessions after a few rejections in the $27.90’s. It doesn’t look ready to go yet but it’s one to keep on the radar in case price begins to firm up again.
LBTYK is turning up here on improved volume after a minor pullback. I like the looks of this setup for a trade on the long side above $71.25, although for a momentum trade rather than a swing. A test of the recent highs would not be out of the question, but this stock tends to move rather slowly and with the broad market so stretched it’s just not an appealing swing candidate for me.
SBGI is challenging a descending trend line here and a turn up through $26.85 could produce a short-term pop. This one just hasn’t shown any lasting upside in several weeks and therefore does not appeal to me here for a multi-day swing.
ABBV is trying to rest here beneath the highs and may need more time. A larger pattern by even another day or two would set up a better swing candidate, but if it breaks out on Wednesday through $47.50 I’ll just take it for the initial move as a momentum play. It’s notable that a similar pattern set up in this stock several weeks ago and never resolved higher, serving as a reminder that anticipatory entries in a pattern like this can quickly fail, so I’ll wait on the breakout as confirmation.
TGI is looking heavy here and could quickly test the recent low. I like it for a momentum short here beneath $73.20 for a potential move down toward $71, but with support there from March and May it could limit the downside progress for this one. For that reason, it will not be a multi-day swing trade for me.
New Swing Trade Candidates:
No new swing candidates tonight, charts need more time to develop further and broad market remains very extended.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
Jeff
Why are there no swing trades? If an extended market is a reason to pause , then find us some shorts please
John, it is very simple. The trend is still up so shorting is not wise here, but we are extended so buying is a chase. I have explained this extensively of late so hopefully this makes sense. As a market participant for a long time, you know that calling a top isn’t wise but neither is chasing a straight-up move.