Good evening StockBandits!
The fourth quarter began today with a government shutdown and the market essentially yawned about it. Stocks opened modestly higher and saw continued strength throughout the morning as both the RUT and NAZ reached new highs to break out from their 2-week trading ranges. The high-level consolidation they had put in allowed them to digest their big runs from the August lows, and the bulls are now back at it.
Meanwhile, the DJIA and S&P 500 were able to turn back up after pulling back for the same period of time, but currently lack the look of conviction so far on the way back up. Today’s afternoon weakness wasn’t unlike Monday’s quiet afternoon retreat, and that will need to change for the bulls if they’re going to avoid further downside in the short-term for the senior indexes. The uptrends remain intact across the board, but the motivation of the bulls seems to be a bit lacking here. Namely, the DJIA and S&P 500 will need to produce some follow through on this expected relief rally.
I’ve got an appointment this afternoon and a commitment this evening, so I need to keep tonight’s report short and to the point.
Let’s get to the charts.
NAZ – The NAZ cleared resistance today to make a new multi-year high at 3817. That completed the measured move to the 3814 area I mentioned a few weeks ago out of the 120-point trading range (3573-3694), but following almost two weeks of basing may allow it to continue running. The trend remains up and this index is still outperforming the S&P and DJIA with ease.
SP500 – The S&P bounced a bit today but showed a somewhat passive attitude on the rebound attempt. Today’s bar was reminiscent of last Thursday’s, so we’ll see if this one finds any follow through or if instead it’s used for raising cash before the end of the week.
RUT – The RUT made a new high today with an upside breakout above 1082, keeping the uptrend intact. This small-cap index has outperformed and simply refuses to retreat. Out of this small 20-point trading range, we could see a projected measured move up to the 1102 area. Given the one-way price action, however, greater emotion could kick in and produce something bigger.
DJIA – The DJIA bounced today but failed to impress anyone with its modest gains. Today’s bar was an inside day and followed a pair of larger declines, plus it only recovered about 1/4 of the 200-point slide of the last two sessions. This looks a bit like Thursday’s bar from last week, which is to say it’s not a real convincing bounce yet.
Notable Names:
PHM is representative of several other homebuilding stocks which have undergone substantial corrections but in recent weeks have started the recovery process. I believe these will take time, but the higher lows are indicative of the trend changes to the positive. That makes this setup better for a position trade than a swing, but there’s ample room for a continued lift in the months ahead.
RAX is in an ascending triangle pattern here but not yet pressuring the upper trend line. A breakout would occur through the $54.25 level as a new high is made, but this one seems on hold at the moment so I’m keeping it on the radar until price can lift a bit more or this base can tighten even further.
ISIS is sitting just beneath a small trend line and looks ripe for another turn higher to continue its existing uptrend. A break above $38.25 looks great for a momentum play for Wednesday, but I’m very selective with drug stocks and this one has been gap-prone in recent weeks so I’m not interested in holding it overnight.
YOKU is at the upper trend line of this still wide wedge. I’d prefer to see this base tighten before considering it for a swing, but if it goes on Wednesday by clearing $28.80 it looks better for a single-day play. Volume did not pick up today, although price finished strong.
P is trying to break above this symmetrical triangle pattern and looks ripe for a possible test of the recent high. I like this one for a single-day play above $25.80 for Wednesday.
AFOP is another stock sitting in a short-term pullback here but an intermediate-term uptrend. This stock has moved a bit sloppy and has been gap-prone in recent months as well, but I do like it for a single-day play for Wednesday if it can clear $21.90.
SWI has a little more room here but if it happens to weaken and break to a new low at $34.40, it looks great for a single-day play on the short side. This is another gap-prone stock, so I’m not interested in a multi-day swing trade.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for better risk/reward profiles to go along with stocks looking poised for imminent moves.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
