Good evening StockBandits!
Friday’s weak finish left the bulls with a little bit of concern over the weekend, but with the trading ranges still intact, there wasn’t reason for alarm. This morning, we saw identical price action to Friday’s open with a small gap higher and an immediate downside reversal. The only difference was that Friday’s selloff was much more tame than today’s. The intraday reversal this morning not only created downside follow through from Friday, but more importantly it produced a downside break of the multi-week trading ranges for both the NAZ and RUT.
The morning selling was intense. Every attempt to bounce was brief and feeble and was quickly met with more selling and new session lows. After more than 90 minutes of it, however, it finally abated. The initial bounce was modest, but was followed by lateral price action and then a steady grind higher to recoup some of the losses. It wasn’t enough strength to finish green, so we were left with declines across the board by the closing bell.
Of all the charts I’ve reviewed this evening, what I find to be potentially the most important is the confirmed lower high on the NAZ. The breakdown there hasn’t yet been duplicated in the S&P 500 or the DJIA, but it’s certainly a warning signal. That’s not to say that this will be the ultimate market top, but for now it is an end to the recent indecision with an emphatic downside resolution. That makes the short-term path of least resistance down, and it warrants renewed caution on the long side. There will be some plays there, but it’s critical to become more selective when there is no “rising tide to lift all boats.”
Both of the new swing candidates listed here last night negated their respective patterns without triggering entries, and have subsequently been removed from the list. All I see tonight of interest are single-day cashflow trades, so I’ll take what the market is offering and not force anything further.
* Later this week we have planned some major site upgrades. As such, there will not be a Charts on Demand video for Thursday, and therefore Wednesday’s update will be the final update of the week. We will be migrating the site to a new server, which may cause some intermittent downtime for the site, including email. This will take place after Wednesday’s evening update, which will be emailed out as usual, so unless you are visiting the site after Wednesday’s report you should not notice anything. If you do visit the site, you may notice some unusual things taking place which are tied to the scheduled upgrades. My expectation is that we are back to normal in time for the Sunday update.
Let’s get to the charts.
NAZ – The NAZ finished down 50 points today, but was off by 86 at the low this morning. Although that shows a sizeable bounce from the session low, it still counts as a breakdown from the multi-week trading range it has spent so much time within. Unless 4246 gets reclaimed in a decisive fashion, we now have a lower high as of Friday and next support to watch will be 4177, last seen in early Feb.
RUT – The RUT also broke down today, bouncing nearly 9 points off the low but still closing 1.3% off Friday’s closing levels. This index confirmed a lower high today, and if 1182 is not reclaimed quickly and decisively we can probably expect a test of 1147 next.
SP500 – The S&P dipped a toe below 1850 this morning but held it on a closing basis to stay inside the range. The rejection from 1883 on Friday morning did show follow through, which doesn’t favor the bulls after 3 tests of that level and a quick retreat.
DJIA – The DJIA has lagged the others since late December, but oddly held up quite well today. This index remains range-bound for now with a pair of clear-cut levels to watch as lines in the sand.
Notable Names:
NFLX is one of several stocks which have quickly shifted from upside leadership names to downside leadership names. I’ll cover two more momentarily, but this stock has declined in 15 of the last 17 sessions. That sort of persistent selling shows a clear change of direction, even if price did test and hold prior support today. There’s still an unfilled gap down to $333.73 which could get filled after a brief rest, so this one looks anything but bullish. It is a bit stretched on the downside, however, and needs some rest.
TSLA is another stock which had been an upside leader but in recent weeks it has rallied to lower relative highs (note the descending trend line) and today broke the support level I highlighted on the blog over the weekend to fill the first gap of several.
FEYE is off some 35% from the high of just 2 1/2 weeks ago, showing just how quickly momentum can turn. This is why it’s so important to maintain stops on trades, because in the blink of an eye everything can change.
PETM is on my radar for a single-day play for Tuesday if it can clear the trend line at $66.75 on the way back up. Today it showed relative strength, but still hasn’t shown a shift of character so I’m only interested in the first pop here rather than a swing.
LNG is against resistance here and I’ll take it for a single-day play on the long side if it can clear $54.70 on Tuesday. It has held up well, but I’d prefer a tighter, more mature base for a swing.
AAL looks to have just carved out another higher low here and now a turn up through the trend line at $37 could pave the way for another lift. I like it for a single-day play if that break occurs on Tuesday.
FLS is testing rising support here and a break below $75.80 could easily spark more selling. I like this one for a single-day play on the short side to participate in the initial break, as a swing stop is just not evident.
WBMD just failed a bounce from Thursday and Friday with today’s quick retreat back to support. A new low at $40.95 looks good for a single-day play on the short side to participate in the initial breakdown move if it happens on Tuesday. Here again, no swing stop is evident so I’ll just use it for a cashflow trade if it happens to break down.
New Swing Trade Candidates:
No new swing candidates tonight, maintaining light exposure while the broad market sends mixed signals for next direction and waiting for better setups to emerge.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
