Good evening StockBandits!
The market extended its bounce to 5 sessions today, building on last week’s string of advances. Today’s was a pretty modest lift, somewhat muted by some morning profit-taking we saw which took the indexes temporarily into the red. The dip was bought, and stocks hovered for the entire afternoon in the green.
Tonight the same conditions face traders, which is that we’re short-term extended on what has largely been a light-volume bounce. There’s still a lack of believers out there, and for good reason considering the price action of the past 6 weeks in the more speculative NAZ and RUT. There has been a lack of leadership, momentum names have faltered, and the lower highs and lower lows in those indexes have painted a clear picture of hot money heading to the sidelines. Whether or not it the correction has run its course, we do not yet know.
Just as it’s unwise to call for tops in the market, it’s equally foolish to declare an end to a correction. Although the indexes now have a fair amount of breathing room down to the lows of last week to establish a higher low on a pullback, the fact remains that the NAZ and RUT are both still in correction mode despite this bounce. The S&P 500 and DJIA are each just over 1% off their respective highs, so they’ve been in more of a trading range. Lasting market moves tend to involve unanimous price action, so with the clear split we’re still seeing here, caution remains in effect until more technical evidence surfaces that the path of least resistance is up.
One last note is that I will be closing out my RAI swing position during tomorrow’s session. I had adjusted the stop over the weekend and will leave that as-is, but will also send out an email to let you know when and where I close the position. Earnings are due out Wednesday in the pre-market, so since I will not be holding into the news tomorrow is the day I’ll be closing it out.
Let’s get to the charts.
NAZ – The NAZ lifted today for the 5th straight session, going out at the high of the day but on very light volume. There’s still plenty of room before the prior bounce high would be challenged, so the odds are still fair that we see another lower high once the current bounce stalls out. The next dip will likely give us a good indication of just how skittish the bulls are, but due to the size of this bounce they’ve got some breathing room to create a higher low.
SP500 – The S&P also ended the day higher for the 5th straight session. Today’s high did stop short of the prior bounce high of 1872, so for now this index is respecting that area. We’re only a fraction of a point shy of it as of tonight’s close though, so we could see that get cleared with minimal upside tomorrow. Volume was light today, so as the bounce gets more extended here there’s certainly reason for caution.
RUT – The RUT saw a small lift today but a finish at the high, leaving it just 5 points shy of the former key level of 1147. The prior bounce high of 1160 is 18 points away, so the bulls will need to keep the pressure on if they’re going to break the string of lower highs. Perhaps their attention will turn to creating a higher low on the next dip once this bounce concludes.
DJIA – The DJIA painted an inside day with a narrow range session today of just 57 points. Volume was light, and price is still range-bound here, waiting for the next catalyst.
Notable Names:
QCOR has stabilized over the past few sessions after a pullback from the recent high. This being a biotech, I’m not interested in holding it overnight, so this will only be a single-day play for me if it goes (plus earnings are scheduled for next week). I like it for a trade on the long side if price can make a multi-day high at $78.60.
MA is stalling out here after a sharp bounce and a bit of profit-taking could offer a trade opportunity here on the short side. I like it for a single-day play to short sell if price breaks rising support at $73.50 to make a multi-day low. The last few drops have been swift, and volume has not confirmed this bounce.
WDAY is hugging rising support after a bounce within the downtrend, so I’m watching for a turn lower. A break below the trend line at $76.50 looks good to me for a single-day play on the short side in Tuesday’s session. There’s 5 points of room beneath that just to last week’s low.
TRIP is another stock which has stalled out after a bounce within the downtrend, so I’ll be watching for a trend line break at $83.65 to get short for a single-day play on Tuesday. The last couple of failed bounces have resulted in quick selloffs, so rather than structure a swing trade with a wide stop I’ll opt to participate in the initial move lower should it happen to begin on Tuesday.
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.
INTU is sitting in a rising channel here and remains in correction mode overall since topping out several weeks ago. I like the risk/reward here for a swing, so I’ll get short if price breaks $73.45 and will initially be looking for a test of the early-February congestion zone, and an eventual move toward the February low as my targets with a stop above last week’s bounce high as a protective buy stop. Earnings are a month out, so this one has time to make the move.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
