Good evening StockBandits!
Tests of short-term levels like 4104 (NAZ) and 1147 (RUT) provided enough motivation for the bulls to buy the dip and produce a lift today. The short-term pullbacks were forgotten today as an upside gap set the tone for the session. Right out of the gates, stocks continued higher before leveling off after the first 75 minutes. Despite an early-afternoon slide, the averages recovered late in the day to end not far from their best levels.
Tonight, each of the indexes are still in high-level trading ranges. They’re pretty narrow, but the point is that stocks are basing and resting, and that’s healthy. It’s a bit of an uneventful January so far with that being the case, but the year is young and there will be plenty of movement in both directions before all is said and done. For now, it’s a matter of staying patient while letting the short-term indecision play out. Each passing day is helping to build larger bases with greater validity to their respective levels, but while we’re inside the ranges it’s just a fact of life that follow through cannot be expected.
I’m sticking with quick plays heading into Wednesday’s session, as I just am not seeing setups I can’t live without on a multi-day basis. That keeps me light in terms of my exposure, which is fine when the broad market is struggling to make lasting headway in either direction. I’m letting the setups build for new swings but while I wait there will be some cash-flow opportunities.
Let’s get to the charts.
NAZ – The NAZ bounced over 50 points from the gap fill to 4104 on Monday to today’s high of 4158, further validating the importance of that gap fill. Price is now heading back toward the recent high of 4177, which will be the magic number to watch on the upside. Until it’s broken though, this index is still range-bound.
SP500 – The S&P spent another day inside its range as well today with a lift after a 3-day decline. It still has yet to fill the 1818 gap or test the 1813 breakout zone, and if we happen to see a new high at 1849 then we’ll have to put those 18-teen levels on the shelf while the uptrend continues.
RUT – The RUT twice tested 1147 in the prior 3 sessions, and today lifted to move right back to the center of its range at 1157. There is a small gap to 1163, but the big levels to keep an eye on here are 1147 and 1167.
DJIA – The DJIA has respected 16400 a few times in recent days and lifted today to return closer to the high of 16588. A breakout through there could set this index back in motion to continue the recent momentum it exhibited in December, but the hurdle needs to be cleared first and the other indexes will likely need to participate as well.
Notable Names:
OPEN was listed here last night with a trigger price of $80.50 for a single-day play. Today it showed exactly why I like these kinds of setups as it quickly ran $3.75 beyond that level. It was a clean trend line break and heavy volume produced a nice pop. These single-day plays can produce excellent cash flow while waiting for more swing setups to emerge.
NFLX has been pointed out here a few times in recent weeks, including the Charts on Demand videos on 12/5, 12/12, and 12/19, as well as in the nightly report (including last week on 1/2). I’ve pointed out the pair of uptrend lines as protective loss-cut areas depending on timeframe and risk tolerance, and we saw the short-term uptrend line broken in late December and since then price has accelerated lower to undercut the primary uptrend line with today’s $20 selloff. This is a major change of character for the stock, and I’d expect bounces to get sold in the days ahead. I don’t see an entry here, but will keep it on the radar. Earnings are scheduled for 1/23.
FB is a highly liquid stock and yesterday reversed higher then showed follow through today to return to test the high. Rather than breaking it, however, it stopped 3 cents shy of it ($58.55 vs. $58.58) today then backed off a bit. This is why it is so helpful to identify and keep watch on recent levels, because they tend to be respected.
ISIS looks good here for a single-day play on the long side if price can clear the trend line at $39.60. That would spell the end of a short-term pullback and open the door for a move back toward the recent high. Upside volume was quiet today and the risk/reward here isn’t all that compelling for a swing, so I’d prefer to just participate in the initial move higher if it begins on Wednesday.
HALO is sitting in a wedge here and has been testing support in recent days, including a false breakdown on Monday. A turn up through the small descending trend line at $15.15 looks good for a single-day play as this one gathers attention and attempts to move back toward the recent high.
ZLC was a huge performer last year and this short-term pullback could easily get met with buying. Price is perking up here and a push through $16.10 looks good for a single-day play for Wednesday as the stock tries to return to the recent high $1 away.
OII is acting heavy but this pattern could stand to tighten further for me before I’d consider a swing. Nonetheless, it looks good for a single-day play on the short side to participate in the initial breakdown should it happen to undercut $75.45 on Wednesday to make a new multi-month low.
ROST saw lots of steady selling a few weeks ago and the bounce since then has stalled out in recent sessions. Price is starting to undercut rising support here and looks ripe for more selling. I like it for a single-day play on the short side if this one breaks $73.60 on Wednesday, as it could quickly accelerate lower. The risk/reward for a swing just isn’t compelling to me though when comparing a protective buy stop above the bounce high and a first target at the recent low ($2 up vs. $3 down).
New Swing Trade Candidates:
No new swing candidates tonight, just not a lot of setups out there and of those that look ready I’m simply not impressed enough with their price action/patterns to initiate plays for multi-day moves. I’ll stick with existing exposure heading into tomorrow.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
