Good evening StockBandits!
I hope your Thanksgiving holiday was great all around. I was fortunate to celebrate with family and never did run out of reasons to be thankful.
The market made continued progress last week as the NAZ maintained a win streak (6 sessions) while the DJIA, S&P 500, and RUT each painted new all-time highs on their charts. Volume took the expected nosedive as the week progressed, but the bulls maintained their edge nonetheless. As we enter the final month of the year, there are many reasons for the bulls to stay excited even if profit-taking looks more tempting than ever. Those who have dreamed of buying low and selling high certainly have an opportunity here to do the latter, it will simply be a matter of whether or not that dynamic kicks in sooner vs. later.
To be clear, right now the trends remain up and there’s no technical reason here to expect an imminent change. Furthermore, deep market corrections rarely occur right from rally mode, as topping tends to be much more of a process than an event. When the bulls have been conditioned for many months to buy dips and get paid, it can take some time for them to become reluctant to change their strategy. That’s why more often than not in a topping market, it’s not the pullbacks that matter so much as the follow-up bounces which tend to occur with less and less vigor. At this stage, we’ve not even seen a pullback as every index just made at the very least new multi-year highs in Friday’s abbreviated session. As such, the long side is the correct side to be on until those changes come along, and at some point they absolutely will. It’s not easy to buy after a run of this magnitude, but fighting the overall trend can be much more painful.
December is an interesting month though, and I want to touch on that momentarily before we proceed. As the month progresses, there are more cross-currents which come into play that aren’t at work during the rest of the year, so they’re worth pointing out and staying aware of. There’s tax-related selling that will be done by some who want to exit positions this calendar year. There will also be some index rebalancing later in the month which means many funds will dump certain holdings in exchange for others. There’s also year-end window-dressing, fund liquidations and redemptions, and another stretch of light volume as the holidays near. Needless to say, it can be a bit more tricky so stay on your toes.
Let’s get to the charts.
NAZ – The NAZ is on a 6-session win streak despite the expected light volume we saw at the end of last week. It’s got a cushion between current levels and 4000, and a 148-point cushion down to the prior pullback low of 3911. That means any pullback that may kick in would have a good shot at establishing another higher low. The initial push through 3966 failed, but the second chance rally since then has been a strong one and keeps the overall uptrend very much intact.
SP500 – The S&P is still grinding higher, although the pace has slowed considerably in recent days and price has been putting in some rest. There’s now a bit of a rising wedge evident on the daily chart, which we need to watch closely in the event of a downside resolution. The first level on the way lower would be 1775, whereas there’s nothing but blue sky above as this index sits at all-time highs.
RUT – The RUT hesitated around 1123 but got in gear last week to push to 1147. This constitutes a breakout for this small-cap index after several weeks of lackluster basing, and confirms the higher low just created two weeks ago at 1096.
DJIA – The DJIA neared the 16200 area last Friday before backing off a bit, and tonight sits with some room on both the upside and downside within the channel. The upper boundary is near 16220 and the lower boundary is 15950, both of which rise daily.
Notable Names:
SLCA is on my radar as it works on this large base and gets closer to the apex of the triangle. An eventual upside breakout at $35.80 could set it free to move higher, it just isn’t knocking on the door just yet.
OII is also on my radar but I’d like to see this low-level base build a bit further before setting up a play. This stock is in correction mode and I expect this small bounce attempt to fail, I’m just watching the small rising support line build and with each touch it’s further validated.
HAL is in pullback mode here but is trying to stabilize. A turn up through the trend line could set it free to start rallying again, it just doesn’t yet appear ready since price has closed well beneath the trend line in each of the last two sessions. I’m keeping it on watch for another day.
CME is near the pullback trend line and a push through $82.60 looks good for a quick pop to test or clear the recent high. I like this one for a single-day play on the long side for Monday’s session but would prefer a larger base for a multi-day swing so I won’t be holding it overnight.
HLF is another one that looks to be completing a minor pullback here and a turn up through $70.30 on Monday looks good for a quick lift. I’ll be a buyer to participate in the initial push higher, although this will only be a single-day play for me given the small base, some recent indecision, and October overhead not far away.
CTRP is stalling out here after a small bounce and now a turn lower could spark more selling. I like this one for a single-day play on the short side for Monday if it breaks $47.40, looking for a retreat down toward last week’s low.
CREE has been very gappy in recent months, so I won’t consider it for a swing. However, it looks good for a single-day play on the short side if it breaks $55.50 on Monday.
YY is putting in a lot of back and forth lately and could be getting toppy in the bigger picture. This 3-day bounce has slowed and now a turn down through $44.90 could trigger some selling. I like it for a single-day play for Monday, but this one has been sloppy of late so I’m not interested in a multi-day play.
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.
WBMD is in a narrowing wedge or triangle pattern here and nearing an exit one way or the other. The overall trend is up, so I’m looking at the long side for a swing if it can clear $39.10 to clear the upper trend line. This clean pattern presents measured move potential, as well as an initial stop loss in the event of a failure.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
