Good evening StockBandits!
The selloff which started last week saw continuation today with each of the averages losing more ground. The new week began pretty flat, but selling throughout the morning left the market painting just its third consecutive decline, yet at levels not seen in more than a month. Stated otherwise, what took the market some 5 weeks to gain has been surrendered in just 3 days. That puts the swift nature of this selloff into perspective. As some key areas were approched (S&P 1775, RUT 1123), we saw a lift from the lows which erased much of the day’s decline. However, late in the session the buyers lost their nerve and the bounce got sold.
In the after hours, AAPL is the story stock and it’s down $44,or 8%. The tech heavyweight is taking the NAZ futures lower as well, which could bring a soft open tomorrow. While this isn’t exactly a bullish setup, the market has become short-term extended after giving up nearly 4% from the high of just last Wednesday, so a gap down open has potential to create a short-term washout type of rebound. That’s of course just one scenario that could play out, but it’s something to weigh here after a hard pullback.
As we head into tomorrow, there’s a distinct lack of setups available due to the big fast move we just got. Nearly all the would-be bearish setups have made quick moves lower, while bullish patterns which had been building have largely been negated with this selloff. Because of this, I’m sticking only with single-day setups for tomorrow to stay nimble while waiting for better plays to surface. I think with the added volatility that there will be some nice plays in the days and weeks to come, but for tonight it’s just very slim pickins. ETF’s can become a go-to instrument when this is the case.
Let’s get to the charts.
NAZ – The NAZ painted its third straight decline today and despite a 31pt bounce from the low, still closed beneath 4104. It looks poised for a soft open tomorrow as well based on weakness in the futures this evening, largely cued by AAPL. Next level of support is 3966, 117 points away.
SP500 – The S&P held 1775 today, but not by much. This is a big level for this index, so if we see a breakdown there things could get even more ugly in the short term.
RUT – The RUT tested 1123 today and held it, but here again it doesn’t have much breathing room. A break below that level could invite tests of prior dip lows at 1099 and 1079 in the days ahead.
DJIA – The DJIA worked its way closer to the December low today, although it did slow the pace of the decline. Today marked the 5th straight decline, making this index short-term stretched but still so far unable to put together a bounce.
VIX – The VIX paused today after a huge ramp last week, but still doesn’t sit far from the big 20 level. That’s not even a historically high level, it’s simply the zone that has been respected for the past 18 months with only 4 closes above that threshold.
Notable Names:
BAC has given back nearly all its gains of the past few weeks post-breakout, but today did hold the $16 level from above. That further validates the level, although it doesn’t look bullish enough here for a play – simply a notable stock trying to hold a level.
PHM is still painting higher lows to keep its uptrend intact, but there is no actionable pattern here. I run across this type of thing often in my chart work. It’s important to only set up plays where there’s a well-defined area to enter and exit based on the price action.
FINL is a good example of a stock that’s showing increased volatility of late with this broadening wedge or megaphone pattern. Higher highs and higher lows are still intact, so the uptrend remains in effect, but the moves are getting bigger, indicating the troops are becoming more restless. No play here.
MRVL is holding up well here after a minor dip. I like this for a single-day play on the long side but only if it can clear $15.15 on Tuesday.
SCTY is trying to stabilize here so I’m now watching the descending trend line for a possible break. A turn higher through $72.10 could produce a quick pop, so I like this setup for a single-day play for Tuesday. The risk/reward isn’t there for a swing.
AREX sold off big then spent some time basing since December as the shares stabilized. Now it’s trying to turn back up and start a recovery, and there’s plenty of room for it to run. I’d like to see this little flag build another bar or two, but if price clears $20.75 on Tuesday I’ll just take it for a single-day play.
SODA was listed here last night but did not trigger today. The stock still looks weak despite a gain today, so I’m watching the same setup which is a single-day breakdown play if price undercuts $36.25 on Tuesday.
New Swing Trade Candidates:
No new swing setups tonight, sticking with single-day plays for Tuesday while waiting for patterns to mature for swings.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
