Good evening StockBandits!
On Thursday after the market had closed, the Fed raised the discount rate, which sent the futures markets heading south. The stage was set for a weak open on Friday, perhaps even a sizeable gap to the downside, on the heels of what had already been a strong week. To see the bulls take profits after such a big bounce would have come as no surprise.
However, no selling was seen on Friday. Instead, the futures rallied steadily through the night, and the market opened relatively flat on Friday. That inspired some modest strength after the opening bell, taking the indexes into positive territory for the 4th time last week, marking a clean sweep for the bulls during the holiday-shortened week.
The upside did not come without concerns though. Not only has the bounce from the February low occurred in nearly a straight-up fashion (virtually no rest), but there’s been a distinct lack of volume to go along with it. That points to limited (at best) participation on the part of institutions, which makes one wonder who will defend this move once the next pullback begins.
There’s little question at this point that the market has become short-term stretched and therefore due for a dip, so the focus will shift from ‘when’ that happens to more of a question of ‘how deep will the pullback be’ once it does arrive. It could very well be that this bounce ultimately results in a lower high on the daily charts, but whether the February low holds or not will be the determining factor for how aggressively stocks can be sold in the weeks and months ahead.
Heading into this week, many stocks (and the indexes alike) have V-shaped patterns without much basing, which means it’s a time for staying nimble and selective. We may enter a short-term trading range if the next dip is shallow, so that’s something to be on watch for as the next few days unfold.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
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Video Stocks Discussed: RAX, FOSL, FSYS, AMSC, AGU, HUM, UA
Swing Trading Candidates:
UA has bounced from its lows over the past couple of weeks, but volume has failed to support it as it continues to decline. This sets up a bearish price/volume divergence which interests me for a possible play on the short side. A break of the rising trend line will trigger an entry for me at $25.40, but only once the break occurs.
Bullish Watch:
LCC, SFSF, VLTR, RAX, HOC, NETL, VRX, SAFM, FOSL, CMG, TSTC
Bearish Watch:
IOC, NTRI, PKX, FSYS, AMSC, RL, UA, BGC, WFR, SWM, ASIA, HUM, AMAG, AGU
The Hit List will be coming out soon with discussion on open positions and swing trade stops and targets, so be sure to watch for it.
