Good evening StockBandits!
The indexes stayed within their respective short-term ranges last week, but three of the four (DJIA was the holdout) made some quiet progress by lifting within those ranges. The recent highs aren’t far away, and now with a few indexes facing breakouts, we could see yet another leg up begin before long. Resistance will need to be cleared first, but it’s within reach of current levels and the bulls have a shot to press their edge and continue the uptrends as soon as Monday.
Many have opinions that the rally is long overdue a correction, citing the length of time we’ve gone without one, the heated action in more speculative names (did you see some of the biotechs last week?), and a host of other big-picture reasons. However, it’s important to remind ourselves that it’s the price action that matters most. At this stage in the rally, we have no evidence of weakening taking place yet. Pullbacks have been shallow and have held above and respected prior resistance levels (NAZ 4081, RUT 1147, S&P 1813, DJIA 16174). The base-above-base price action we keep seeing has perpetuated the rally, and could once again do so here.
So rather than jump to conclusions or predict a top, it’s best to continue to let the price action serve as our guide. Yes, the market has come a very long way and yes it’s long overdue for a rest or a pullback. Yes, there are many topics of potential concern, and yes many names are very extended and not in shape for new long entries. But technically, the uptrend is still intact and that’s not something to ignore.
Given that viewpoint, it’s difficult nonetheless to locate a lot of great setups for new swing entries. That has been the case for some time now as the breakouts have largely been muted and unimpressive, not marked by momentum and greater emotion that can produce the quicker, bigger moves. That has made for more of a sluggish pace and some stale charts in some, while others have ramped nonstop and remained extended for long periods of time (making them candidates only for the quickest of plays). As traders, we have to take what the market is offering, whether that means more single-day types of plays (which have been very rewarding of late) and fewer swings, or vice-versa. Selectivity is always important, including right now when the highest-quality patterns are harder to locate.
Let’s get to the charts.
NAZ – The NAZ pushed past 4177 last Thursday intraday but still hasn’t managed to close above that level. A push through it would constitute a breakout, and as of tonight that level is only a few points away. Last week’s volume was much heavier as this index moved higher and traders returned from vacations, which is a definite positive regardless of which direction we go from here.
SP500 – The S&P eased higher within the range by about 11 points last week to leave it just a short distance from the high of 1849. A breakout there would start another leg higher to continue the uptrend, but until that break occurs this index is still caught in the range. The quiet progress was positive though and sets up the bulls for another run if they want it.
RUT – The RUT made a little headway within its range last week to finish about 3 points from the high of 1167. This range is 2o points wide, which would be the initial projection to the upside (1187) if a breakout takes place.
DJIA – The DJIA slid 33 points last week but in the process it further validated 16400 as the lower area of the range and was still able to hold inside the boundaries. This index is a bit farther from a breakout than the others, but it’s a tight range and could still accomplish a breakout in a single day. For now, the rest continues for this senior index.
Notable Names:
USO is trying to respect key support here after testing it and holding it on a closing basis last week. This keeps the wide range intact, but I’m not interested in a play here right now. Friday’s upside volume was light compared to recent distribution days, and price only gained 11c. Nonetheless, it’s an interesting chart to study as we see the intersection of an oversold stock coming into key support.
CTRP is another interesting chart here. Price just rolled over hard from the low $50’s into the $30’s, leaving it very extended here. It didn’t quite fill the entire gap from 7/31, but it did fill the void on the chart after over 5 months. The bigger the gap, the longer it typically takes to fill, and this is a nice example of that.
VJET looks great here for a single-day play but a swing would require a stop some 7% away (down to rising support), which is too far from me. I’d like to participate in the initial pop though, as it could be sizable given the momentum this stock typically exhibits. I like it for Monday on the long side if it can clear $44.80 and exit this wedge to resume the recovery.
AG looks good here for a single-day play but I’d like to see it tighten before considering a swing (current stop would be over 7% away). Price is pressuring short-term resistance and a breakout through $10.70 on Monday could allow for a quick spike higher.
HAL just carved out a higher low and now a turn up through the descending trend line at $50.60 could free it up for a quick rally. I like this for a single-day play but not as a swing here as a stop would be a bit wide, making the risk/reward less desirable.
XEC is testing key support here and a break below $94 could spark more selling. I like it for a single-day play for Monday on the short side if it breaks $93.70, but would prefer to see price pause in this area before considering 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.
XONE is still acting great here and a push above the trend line at $67.50 will trigger a buy for me as price heads back toward the late summer resistance area. I will have a protective sell stop just beneath Friday’s low, as I would not want to see the breakout fail.
FSLR has been heavy and just paused for a few days to carve out some support. A break below $51.30 and I’ll get short for a swing as the correction continues. I’ll have a protective buy stop above the highs of the past few sessions and will be looking for a retreat back into the congestion zone from July and early August as an eventual target.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
