Happy New Year StockBandits!
I hope you’ve had some time to step away from the markets lately and enjoy the holidays and refocus for the year ahead. I was able to and it was very nice.
2013 is behind us and 2014 has arrived, with a new slant on stocks (so far). One day certainly does not a trend make, but the market stumbled out of the gate today with a downside gap, a feeble bounce attempt in the opening minutes, and then some downside continuation. Some blamed it on tax-related sales, others felt it was simply overdue profit-taking. Regardless of the cause, the fact is that prices have pulled in from their highs.
The early sessions of the new year are not immune to unusual activity, as market participants make sales or buys in the new calendar year. However, I wanted to put out a report this evening now that the holidays are behind us. In the days ahead, the market should quickly return to technical and news-driven activity, and it’ll be nice to have the calendar-driven activities out of the way for a while.
Given the strength not only throughout 2013 but right through to the end of the year, many stocks are in need of rest. It’s important not to chase extended names in hopes of a blowoff type run, even if we cannot rule that out. Trading is about probabilities and making wise choices as frequently as possible, which includes individual entries and exits but also big-picture awareness of not becoming too aggressive into an extended tape.
I’m down to just one swing position (actually now a half position given that target 1 has already been reached), which leaves me light on my feet to pursue new setups as they come available. As usual, I won’t be forcing new trades, but when they surface I’ll not hesitate to get involved and share them here as well.
Let’s get to the charts.
NAZ – The NAZ gapped lower this morning by 16 points and then shed another 17 by the closing bell. It was able to finish off its low of the day, but the end result was still the look of a short-term trading range starting to form. Price has room down to an unfilled gap to 4104 as the next possible level of support if the downside pressure continues.
SP500 – The S&P turned away from Tuesday’s new all-time high with a weak session that left it just 13 points from an unfilled gap (1818) and 18 points from prior resistance (1813). After the big post-FOMC rally, this looks like normal backing and filling, but we’ll see if the change of the calendar alters the aggression of the bulls when it comes to buying dips in the coming days.
RUT – The RUT came right back down to test the prior high at 1147 and fill a gap as well. That leaves it 17 points off its high but with a few levels on the downside which may attempt to serve as some support if tested.
DJIA – The DJIA ran almost 900 points from mid-December to Tuesday’s all-time high, leaving plenty of room for some profit-taking. Today we saw some kick in, and there’s still plenty of room for more before the next technical test would occur at the prior resistance zone near 16174.
Notable Names:
NFLX has been a huge leader for all of 2013 but just in the past few sessions broke its accelerated uptrend line. It has thus far been unable to reclaim it, which opens the door to the primary uptrend line near $338 as of tonight. This isn’t necessarily a change of trend, but it is a change of pace and something to take note of in a leadership name.
TWTR has no rules on what it might do (like any other stock), but the parabolic rally, selloff, and subsequent bounce still leaves it looking vulnerable to more downside. It’s a slippery stock, but the light upside volume of the last 2 sessions makes the bounce difficult to trust. Another test of the $60 area doesn’t seem out of the question.
WUBA is a new issue that’s shaping up here with a bit of a large cup & handle look to it. In the past few sessions, it has stopped shy of $40 but a breakout at that level could invite more momentum. For now, it looks like it needs more rest so I’m keeping it on watch tonight.
ISIS just pulled back and today’s upside reversal looks like the dip may be completing. A break above the trend line at $40.10 could set it free for a quick rally, so I like it for a single-day play above that level. It’s a biotech and I’m just looking for a bounce back toward the recent high, so the risk/reward for a swing just isn’t all that appealing.
CLDX is looking like it could push out of this low-level consolidation and catch a bid. The setup is not a picture-perfect swing, but it does look to have some potential for a quick lift so I’ll take it for a single-day play if it can clear $24.80 on Friday.
FSLR cleared a descending trend line today and has some room to run if it can show some follow through. I like it for a single-day play for Friday if it can clear $57.75.
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.
RAX is hugging rising support after a multi-week bounce and then some stagnation in price. Today it turned lower and now I’m interested in a short if it can break the trend line at $37.50. I’ll have a tight stop in place and will be looking for tests of prior levels from a few weeks ago (gray lateral lines).
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
