Good evening StockBandits!
The major averages pulled back in a steady fashion last week, giving up 3-4% as the bulls went 1-for-5 on the week. That pullback came right off the June highs, which of course were established after nearly a one-way rally up from the lows. There’s been plenty of back and forth in this market, which means it’s still reversal-prone and very much catering to traders.
The good news at this point is that some stabilization seems to be setting in with Friday’s action, leaving the indexes just above some key levels. In addition, the pullback has come on light volume, which suggests the buyers haven’t completely disappeared in an effort to raise cash. And finally, with a steady pullback off the highs, this market still has good potential to establish a higher low on this dip. Relentless moves tend to be more reversal-prone, and the lows are still a considerable distance away, and that raises the odds that at least a short-term tradeable bounce may arrive soon.
The key for the week ahead will be to see stocks show some signs of life again to help create that higher low look on the daily charts. We’ve already seen higher highs created with the early-June highs being cleared last week, so the next element the bulls will be pulling for is going to be a higher low. The opportunity is before them, so all eyes will be on the buyers this week to see if they can produce it.
It’s too early at this point to declare this a major turning point for the market, and in fact many still fully expect to see the June lows penetrated eventually. Things may play out that way, but for now as short-term traders, our job is to identify good opportunities and capitalize on them. Things look somewhat short-term oversold at this point, so it’s a good spot to exercise caution with new shorts. Shortened timeframes are always best in reversal-prone markets, so keep that in mind this week as well.
For tonight, my notes are on the charts below for index levels and potential trades I’m eyeing for Monday.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
FAST has pulled back in recent days to create a falling wedge pattern, which is bullish since these usually are resolved to the upside. Given the upward momentum this stock exhibited prior to this wedge pattern, I like the potential for another leg up soon. I’ll be a buyer for a swing trade if this one clears the upper trend line at $52.75. My stop and target levels are displayed in the Hit List post.
CTRP broke out two weeks ago and then last week pulled back on light volume. The pullback held the breakout zone (dashed line below), which is very positive. This one has had some nice recent momentum, so a turn higher from here could produce another nice advance. I’ll be a buyer if the trend line is broken at $44.40 for a swing trade. My stop and target levels are displayed in the Hit List post.
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades.
Bullish Watch:
ARBA, VMW, AXE, CAT, MMM, CLF, ANV, SRCL, NAV, CTRP, YGE, CMI, CF, OVTI, OIH, AONE, EGO, CRUS, MCO, VECO, XCO, FAST, IVN, RINO, UTX, PCAR, CDE, LNCR, SFL, BEAV
Bearish Watch:
BIG, QCOM, BP, MON, MOS, GPN, CECO, DV
The Hit List post will follow shortly with my trade levels for the swing trades.
