Good evening StockBandits!
The market put in a well-deserved day of rest today with some narrow-range bars on the NAZ and RUT to signify some needed digestion of the advance since last week. The S&P completed its gap fill to 1685 and lifted a few points past that, while the DJIA saw its third straight triple-digit gain to lead the way as it edged closer to 15400.
With the NAZ and RUT each sitting near their highs yet fresh off big rallies, the most prudent play here is to simply lay low. Bullish stocks have in many cases become extended after their participation in the recent strength, whereas stocks that were generally acting weak have in many cases seen at least a partial lift in sympathy with the nonstop market advance.
That has left my watch lists more limited than usual, serving as a reminder to stay selective here until quality setups are more prevalent. It’s easy to lower your standards in an effort to just participate or be active, but after a big move is the time when churn becomes so easy and overtrading tends to happen.
To see 3 of the 4 averages do very little today was still a win for the bulls, as a rest is better than profit-taking for them. That isn’t to say a pullback will be avoided, but simply another session where the bears remained frustrated. We’ll await the next catalyst while stocks attempt to base, and I’ll keep working the charts in search of quality plays.
Tomorrow I’ll have the Charts on Demand video where I review your stocks, so if there are a couple of tickers you’d like me to add to the list, just hit reply and include them.
Let’s get to the charts.
NAZ – The NAZ tried to pull back a bit today but still managed to close just a point off its session high. That’s what you get in a strong tape, and this has certainly qualified as one the last couple of weeks. This index could still stand to rest, as today was much more of a pause than a pullback.
SP500 – The S&P completed the gap fill to 1685 today and also closed at its high of the day. This index remains very strong but has become extended and badly needs a rest. It’s just 20 points from its high of 1709, but the bulls don’t want to see a breakout happen with prices very stretched, as it could quickly lead to a failed breakout due to natural profit-taking. Therefore, a rest before continued strength would be the ideal scenario.
RUT – The RUT is still flirting with the 1056 area that it spent considerable time against in July and August. This index has repeatedly respected levels the past few months, so this would be a logical spot for more rest if the bulls will allow it.
DJIA – The DJIA continued its sharp ascent today and closed just 74 points from the 15400 level. That would be a logical spot for some profit-taking or some rest, so if we get a higher open stay on your toes for some possible selling. That said, there’s plenty of room down to recent support so that favors the next pullback creating a higher relative low. We’ll see.
Notable Names:
ACAD broke out a few days ago and has held that breakout. The last two sessions it has risen a few cents but each were inside days and that equates to some rest. A turn up through $23.10 could spark renewed interest, and given the recent strength I like this for a single-day play. I would want to see a larger base or pattern to consider it for a swing.
RKT is one of a few stocks sitting right at the top end of its channel. The lift to resistance has been swift, leaving no well-defined swing stop for this trade, so instead I’ll take it for a single-day play to participate in the initial breakout if a new high is made at $118.50.
TRLA is another at its highs and I’m interested in a single-day play through $48.50 if that level gets cleared. Here again, no swing stop is apparent on the chart so I won’t be holding it overnight.
SRPT is sitting on a rising trend line tonight which has marked the pace of the bounce of the past few weeks off the low. The advance has stalled in recent days and today price started to turn lower. A break of the trend line at $36 could spark some quick selling in this stock, so I like this setup for a momentum play on the short side if that level is undercut. Being a biotech and given the strength of the past few weeks, I’m just not interested in taking it for a swing.
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.
WDC was listed here last night as a swing but did not trigger today. I’m relisting it with the same pattern but a revised trigger price given the ascending trend line that price is respecting on the bounce. I’ll get short upon a break below $65.40 with a stop above the primary downtrend line and will look for a retreat back toward the $60 area. The modified trigger price alongside the same stop loss price gives this a slightly better risk/reward profile.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
