Good evening StockBandits!
Following the 3-day weekend, stocks opened the holiday-shortened week somewhat flat in search of direction. During the opening hour, they came under some pressure with each of the indexes moving into the red with some selling prompting a retreat from the morning highs. It didn’t last long though, and by noon the indexes had recovered. That bounce found follow through to see new session highs being made in the afternoon.
Aside from the fact that the bulls held their ground by defending the early weakness, they went home tonight walking tall after producing new 52-week highs for the DJIA and S&P 500, as well as a new all-time high for the RUT. The latter index is now pushing 900, which is truly a feat after having tagged 763 the week before Thanksgiving. The RUT has rebounded some 17.7% from that low of 2 months ago, which truly is impressive.
There are a few questions at this point which traders are asking. First, can the NAZ catch up and achieve a multi-year high alongside the others? It stands 53 points shy of 3196 tonight, but is gaining ground. Second, is the small-cap run getting too frothy to continue? And third, if the NAZ refuses to join the breakout party, will it drag down the others?
Time will provide us with each of those answers, but for now it’s important to stay objective. This market has been strong and has had opportunities to pull back, yet it hasn’t. The small-cap rally certainly seems to be a bit much in such a short period of time, but when momentum is present it’s a difficult thing to interrupt. We have earnings and the debt ceiling as potential catalysts, so we’ll just stay on our toes and keep locating good setups with risk/reward profiles which are fitting.
Don’t forget to be submitting your stocks for this week’s review video!
Let’s get to the charts.
NAZ – The NAZ again respected last week’s high by staying beneath 3144 today, although the futures have popped this afternoon on a positive report from GOOG and that is likely to push this index beyond that level tomorrow morning. Up next for resistance is 3171 from October followed by the 52-week high at 3196 from September.
SP500 – The S&P keeps adding to its breakout through 1474 from last week, which is of course very bullish. That gives this index a bit more breathing room for a pullback to possibly hold above that level.
RUT – The RUT just keeps cruising higher and now is pressing 900 after tagging the mid-700’s in November. This move is getting rather extended, but as of yet there are still no signs of fatigue.
DJIA – The DJIA is now up nearly 6.5% from its low on New Year’s Eve when it turned back up from the 13300 area of support I had been highlighting. That’s a very big move for this senior index, but today it broke out to a new multi-year high. Next resistance is the 2007 high at 14198.
Notable Names:
GS has gone parabolic since mid-December, tacking on more than $30 along the way. This stock is approaching a breakdown level near $149 from May 2011 which may be a logical area for some profit-taking to kick in. Regardless, financial names like this one are helping the S&P to a great extent right now.
NFLX has been channeling higher since early December and here it has pulled back quietly to test rising support which stands near $96. Should the buyers defend this trend line, it could produce another nice rally to the upper end of the channel (now approaching $110 and rising daily). At the moment, it’s acting a bit shaky, which suggests a battle is taking place right here.
RIMM has tacked on over 55% in just the last 8 sessions! This kind of momentum should not be fought, although it’s fair to say it doesn’t tend to last long either. Trading the shares should be done only on an intraday basis in a name like this, whereas overnights are better for options as a way to completely define one’s risk.
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.
SOHU is building up some pressure here inside this triangle pattern with room to rip higher if it can push past $49.80. I particularly like how I have well-defined rising support from the past couple of weeks as a safety net for this buy.
MGM has been building a very clean triangle pattern here as well with clear resistance just above current levels. I’ll get long for a breakout play through $13.25 with a stop at $12.75 and targets at $13.95 and $14.60 near prior resistance zones from last spring.
POT has pulled back quietly in recent sessions but hasn’t seen a change of character. This appears to simply be a dip within the existing 2-month uptrend, so I’ll be using $42 as a trigger for a buy as this one turns back up to test prior resistance. The uptrend line will be my safety net in case of a failure.
GGC has pulled back on relatively lighter volume in recent days, but the stock turned back up today on expanding volume. I like this setup quite a bit and will get long upon a push through the trend line at $47.55, looking for at least a test of the recent high. I’ll set a stop just beneath last week’s low.
[table “407” not found /]
