Good evening StockBandits!
Early strength in the futures markets propped up prices this morning for an upside gap at the open. From there, we saw a partial gap fill before new highs were made late in the morning. As the day wore on, however, the strength wore off and the afternoon was characterized by a few hours of trending to the downside. The NAZ shed over 64 points from its intraday high to its low at around 3:15pm, and it looked as though the selloff would continue. Ultimately, we did get a bounce in the final 45 minutes which made all the difference for the day, giving the indexes a modest gain by the closing bell.
Stocks remain short-term extended here to the downside, but they also remain weak. Today’s late bounce does not negate that. The weak upside volume that came with today’s bar highlights the lack of conviction we’re seeing right now on the part of the bulls. Perhaps we’re poised for more of a lift on the current bounce, but today’s bar certainly did not constitute a positive change of character.
Today’s late-day short-squeeze aside, the primary response of traders right now is to sell strength rather than chase strength higher. Eventually, we’re going to get a big bounce due to oversold conditions and an increasingly emotional tape, but my sense is that we’ll have a better shot at a lasting low forming after a wash0ut-type of move on the downside. If we’re going to rally after a gap, the odds seem higher that it happens on a downside gap when the last of the sellers have already jumped ship. That sort of scenario would set up a better bounce opportunity than any gap to the upside, as the price action showed us today.
The charts of individual stocks remain sloppy tonight, so there’s not a lot to highlight in the way of new trades. What I do see tonight only interests me for single-day plays in tomorrow’s session, as swing bases just need more time right now to tighten. We have seen a lot of sharp reversals in recent sessions, and that could easily continue. In that kind of environment, a stick-and-move approach works well and it doesn’t require heavy activity either.
Let’s get to the charts.
NAZ – The NAZ was able to pull out of an afternoon decline to push positive on the day. Given the hard selloff of the previous two sessions, this looks like merely a bounce before a test of 3966. Today’s upside volume left much to be desired for the bulls, and with lower highs in place we’ve yet to see a trend change.
SP500 – The S&P lifted enough to reclaim 1823 today, but still ended the session 42 points off the mid-week bounce high from last week. This index still has ample room to retrace more of the February rally, but is attempting to stabilize here temporarily. Note the weak upside volume today in this index as well.
RUT – The RUT painted a green bar today, but it was minimal at only 3 points. This index is still 45 points off last week’s bounce high of 1160, and remains beneath the most recently-broken support level of 1123. The trend is still down and today’s small lift did not change that.
DJIA – The DJIA had broken down last week but not by much, so today it didn’t take much to get price back within the range. Volume was lacking on the bounce, but Friday’s decline was erased. Still 283 points to go before last week’s bounce high would be reached at 16456.
Notable Names:
NTES has just bounced big from the low of last week, tacking on over 10% from that level during the lift. However, volume isn’t confirming the bounce and we still have lower highs in place on an intermediate-term basis. Short-term momentum should not ever be ignored, but the big picture always should help to provide some guidance, so this doesn’t look like a chart to chase.
CHD is basing in a high channel pattern, holding up much better than the broad market has in recent weeks. This one may prove capable of breaking out to the upside, but for now I’m keeping it on watch as price sits in the center of the range. I prefer to see price pressuring resistance to suggest an imminent breakout, which isn’t taking place just yet.
MPC is also on my radar as price gets squeezed between lateral support and declining resistance. An upside break and we could see price gain some traction, and a downside break and we could see the correction gather steam. For tonight, I’m holding off on a play and will wait to see if price gets nearer to one of these trend lines.
APC is turning higher within this bull pennant and an upside breakout at $98.40 would invite more short-term strength. I like this setup for a single-day play on the long side for a quick return to the high or beyond.
AU is basing here and a turn up through $18.50 would allow price to lift back toward the recent high, about $1 higher. I like this setup for a single-day play for Tuesday if it can clear the upper trend line.
CTSH just bounced from support and now is facing a steep descending trend line. A turn up through the trend line at $48.80 could take on the appearance of a reversal and may invite some short-term momentum. I like it for a single-day play on the long side for Tuesday if price clears $48.80.
RAX is at key support tonight and a breakdown could spark a swift move lower. This chart is reminiscent of last night’s GOGO chart, which yielded an excellent trend move lower today of more than 8% (I hope you caught some). I like this one for a single-day play on the short side for Tuesday if price makes a new low at $30.70. That would allow me to participate in the initial breakdown move, but a swing stop is just not readily apparent on the daily chart so I’ll be out by the end of the day.
New Swing Trade Candidates:
No new swing candidates tonight as charts still need time to set up cleaner patterns with more attractive risk/reward profiles for multi-day moves. RAI stop adjusted tonight to breakeven after a solid advance today. Due to earnings approaching, I will be out of RAI by the end of the week but will update again between now and then.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
