Good evening StockBandits!
Today we finally saw a decline, but it was of the harmless variety. The indexes mainly marked time with very minor retreats, none of them showing any negative change of character. The QQQ win streak was broken today as it gave up an entire dime after 14 consecutive advances, which is nice since we can have something else to talk about going forward!
It’s options expiration week, which always brings another factor into play as derivatives get opened or closed for the current or next month, and the hedging that goes along with it requires additional stock transactions. That means the action can be a bit more mechanical than technical, so it’s something to keep in mind. Additionally, it’s the first big week of earnings reports as we’ll hear from the likes of AXP, BAC, IBM, INTC, GOOG, MSFT, MS, VZ, HON, GE and a ton of others in just the next three sessions. Toss into the mix the fact that the broad market remains short-term extended, and there are ample reasons to stay picky right now. I’ve found in my own trading in the past that when I have to look under every single rock in search of a setup, it’s a good time to do less rather than more.
Tonight I’m going to go through a few extra example charts because they are present, and with fewer setups for trades available right now it’s a good use of our time to either learn some new concepts or be reminded of important ones.
Let’s get to the charts.
NAZ – The NAZ backed off slightly today but still has quite a bit of breathing room down to the prior high of 3532, as well as an unfilled gap to 3520. Volume picked up, which is common to see during option expiration weeks.
SP500 – The S&P again neared the 1687 level today but couldn’t jump the hurdle. Instead, it respected it and backed off a few points. A high-level pause would create a better breakout situation than if we were to see this extended index push through resistance and then come under profit-taking.
RUT – The RUT put in a day of rest today with a small decline. This index has made a giant run in the past few weeks and certainly has room to pull back without doing any technical damage.
DJIA – The DJIA is churning here beneath the highs, which is a constructive way to digest the recent run. More rest would be ideal for this index, but it isn’t quite as extended as the others.
Notable Names:
GS beat on EPS and revenue this morning, yet the stock was sold. This is why trading earnings is so difficult, as even if you had known the numbers ahead of time you still don’t know how the market responds to it. I do my best to avoid earnings announcements and this is today’s example for why sticking to technical trades tends to simplify it all.
ROK is an example of why I prefer to wait for a breakout rather than place anticipatory trades beneath lateral resistance. Today this stock got within a penny of its prior high and then pulled back. Waiting for the ceiling to get broken brings blue sky into view, whereas price containment prevents any follow through.
TSLA has been on quite a run and I highlighted the accelerated uptrend line here just two nights ago. Today there were some negative comments out about the stock and it came under pressure, quickly breaking the rising trend line and never looking back. Playing the momentum game means keeping a close eye on the price action, and anyone caught long this stock this morning had a technical reason to exit after seeing the uptrend line broken. It now needs time to rebuild after today’s negative change of character.
LNKD is spending some time beneath key resistance and every day counts. Something along the lines of a high-level consolidation here would set up a better breakout scenario, so a few more days of lateral price action would be preferred.
CLDX is basing here but needs to tighten further. I’m keeping this one on watch in hopes that this pennant can mature a bit and bring these converging trend lines closer together to set up a play.
CERN is trying to rest at the upper end of this channel. Some continued lateral drift could create some short-term support that could be used as a stop for a breakout play. The projection would be the height of the channel, but a breakout doesn’t yet look imminent so I’m keeping this one on watch.
ESI just hit upper resistance and now looks like it could stand to rest after 7 advances in the past 8 sessions. Here again, it’s a high-level channel pattern which could serve as a nice base for much higher prices, but I am not interested in chasing a stock that’s just seen a big run in the last 2 weeks, so I’ll wait to see if it can base a bit first.
AMBA is still holding above rising support and coiling beneath resistance here. These trend lines are converging and eventually would squeeze price into a directional decision. The overall trend is up, so I’m watching this with a bullish bias, but with price at the center of the pattern it looks to need a bit more time before a breakout looks imminent.
WLT has lifted from its recent low after a trend line break and has paused for a few days. It might roll back over, in which case I have no interest in shorting it. However, a turn higher through $12.75 could see it catch a quick bid, so I’ll take it for a momentum play on Wednesday if it can clear that level. A swing stop would be a considerable distance away, and the overall look of this pattern just needs to mature more before I’d be willing to hold it overnight. For now, I’m interested only in the quick pop.
MGM is basing here beneath $16 key resistance and looks good for a momentum breakout play any day now. I’m only interested in a quick play if it clears that level to capture the initial move higher.
New Swing Trade Candidates:
These stocks look ready for imminent multi-day moves. Pattern confirmation occurs with a move through the entry level. Initial stop and target levels are also provided.
NDLS recently went public and saw a quick initial lift. It has since settled into a tight wedge and may be ready to try again. Today it made a multi-day low and then reversed higher and now is challenging the upper trend line. I’m looking to get long for a swing if it clears $43.50 with a stop at $42. That sets up a nice risk/reward profile for a move back up. I’ll of course keep a stop in place at all times, as this one has very limited trading history and therefore could quite feasibly make unusual moves.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
