Good evening StockBandits!
The market was able to post another advance last week as blue chips broke out to a new multi-year high in the S&P 500 and small-caps continued to reach new all-time highs. The DJIA worked its way right up to the 52-week high, giving it a shot to achieve a breakout this week, while the NAZ made only modest progress to lag each of the other averages.
Technically, the indexes remain in very healthy condition. Strength has been followed by phases of rest, and decision points have repeatedly favored the bulls of late. The test of support at the end of December was met with a big ramp higher, and subsequent pauses in momentum have been followed up by follow through. That puts the bulls in the driver’s seat as we head into this holiday-shortened week of trading. What they’ll want to avoid is any meaningful profit-taking at this juncture, as that would be viewed as a breakout failure and therefore a very important headfake. A continued push higher before some selling kicks in is what the bulls would see in their ideal scenario.
From a headline perspective, we have some big earnings reports rolling in this week which could really set the tone in the near term. This could have the biggest impact on the NAZ in the coming few days with MSFT, AAPL and GOOG all set to report this week. Aside from that, we have the debt ceiling issue drawing nearer, which could also prompt some added caution if traders start to become skittish.
Let’s get to the charts.
NAZ – The NAZ added a modest 9 points last week to ease past 3127 but not by much. This pushes the short-term range to 3076-3144, with the October bounce high (3171) and the 52-week high from September (3196) as next resistance areas.
SP500 – The S&P finally broke out through 1474 on Thursday, then produced a bit of follow through on Friday. This isn’t an overly impressive breakout and it still leaves room for failure, should some decent profit-taking kick in at this point. However, the bulls faced an obstacle, they hesitated, and then produced the breakout. They deserve credit for that.
RUT – The RUT just keeps edging higher since the 12/31 – 1/2 back-to-back sessions which added 5%. We’ve seen some healthy basing action and now a push through the short-term resistance which had been at 883. A projection out of this bull flag could point to a push toward 933, which would be highly impressive. However, stranger things have happened and the bulls are certainly at the helm for now so I have no interest in fading this strength.
DJIA – The DJIA showed steady strength last week and now faces its 52-week high just 12 points from Friday’s closing level. Should this index happen to rest before a breakout attempt is made, it would be very healthy, but not entirely necessary.
Notable Names:
CREE is caught between a pair of key levels near $31.30 and $35.15, respectively. Last week this stock lifted from support and now seems intent on filling the gap from a couple of weeks ago as it works its way back toward the upper portion of the range. Expect more shifts of direction until a meaningful exit from this range is seen.
GLW is looking heavy here after carving out a pair of lower highs in recent weeks after small bounce attempts failed to produce follow through. This gorilla glass maker should be thriving from the smartphone boom, yet it now is weighing on support near $12. A break below there could lead to a gap fill to the $11.35 level, making this one a stock to avoid for now.
WHR is channeling higher but it has moved laterally for the past couple of weeks and now may be offering a caution signal with Friday’s bar. The decline was nearly 5% for the day and it came with a weak finish and elevated volume, pointing to distribution kicking in. As the lower channel line draws closer, this is one to watch. An exit to the downside would suggest a negative change of character and would put significant importance on the next bounce.
AEGR is sitting in a nice clean pattern here but it’s still quite wide on a percentage basis. Currently, an entry on a breakout and a stop below the ascending triangle would be about 7% apart, so I’m going to wait to see if this triangle can tighten a bit more before eyeing this one for a swing.
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.
APC was listed here last week with a $78.30 trigger price which has still not been met. This pattern has tightened in the past few days, hence the reason I’m relisting it here with a revised trigger price of $78.00. My stop and target levels are the same and I still like this pattern, but I’m waiting for it to confirm this pattern before making an entry.
JOY cleared resistance two weeks ago and has held above it with the creation of a small channel-like base. This sets up a nice risk/reward for a trade on the long side, so I’ll be using $69.25 as a trigger for entry with a stop beneath short-term support. This one looks to have room to rally up to an unfilled gap followed by a congestion zone above that from the spring.
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