Good evening StockBandits!
Stocks spiked from their pullback lows last week with a modest relief rally Wednesday from oversold levels and then a huge gap-and-go lift on Thursday amid news that perhaps the debt ceiling could be pushed back 6 more weeks. Bears who were left out in the cold blamed Punxsutawney Phil, but the strength continued into Friday as stocks lifted from short-term depressed levels in hopes of pushing back a US debt default.
Interestingly, it’s Sunday evening here and there’s still no deal. With just 4 days remaining until a possible default and the government shutdown nearing completion of its second week, lawmakers are supposedly scrambling to put something together. The trader in me has to wonder though, after such a volatile snapback rally, just how relieving a deal could be to propel stocks higher in the next couple of days. It seems the market has already responded in hope, which could set up a buy-the-rumor/sell-the-news scenario this week. Additionally, if no deal is reached in time, it’s not out of the question that the market throws another tantrum. Regardless of what happens, it’s sure to be another memorable week.
As for the charts, well, they’re extremely sloppy at the moment. We saw a swift selloff, then a violent rally which has left many names sitting in V-shaped patterns. There’s nothing that says the strength will be unable to continue, it’s simply a matter of motivation on the part of buyers. With a deadline approaching, there’s ample room for worry to slip back into the equation. The fear index (VIX) collapsed from Wednesday’s peak above 21, leaving it with some room to turn back up as well.
Given the lack of excellent setups and the dark cloud of uncertainty in what has already proven to be an emotionally-charged tape of late, I’m going to stick with my lone existing swing position and be very picky with new selections. Literally anything (and potentially everything) can happen in this type of environment, which makes it incredibly tricky and far more difficult to maneuver for multi-day swing trades. As such, I’m eyeing some single-day plays as we head into Monday because I think there’s opportunity there and those types of plays require some attention – something that’s a necessity in a fickle, news-driven market like we’re currently in.
Let’s get to the charts.
NAZ – The NAZ broke out 2 weeks ago but couldn’t hold it, then sold off to test 3694. It broke that level last week to the downside, but again reversed and vaulted higher by 144 points off Wednesday’s low. It’s now just 28 points from the high of 3819, but Washington still has issues and buying interest could dissipate after this huge V-shaped rally. For that reason, some rest and digestion may be in order.
SP500 – The S&P came back down to test 1671 last week and broke below it for just 2 closes before reversing back up to end the week at 1703. The vertical lift leaves this index needing some rest, but the news flow may not allow it, making this a potentially very tricky week. I would expect 1709 and 1729 to be respected if reached.
RUT – The RUT got within 1 point of 1036 last week then rallied 47 points to finish at 1084. That leaves it just 3 points from the all-time high, but also very short-term extended. Any breakout needs to stick, or it may not be long before we see the gap to 1043 get filled.
DJIA – The DJIA is fresh off a 518-point rally off Wednesday’s low. This index broke the August low by just 41 points, but saw a similar upside breakout in mid-September as it crossed the August high by just 51 points before reversing. In both cases, price had run for a few weeks without basing, leaving price vulnerable to a reversal. Tonight the nearest level to watch is 15400.
VIX – The VIX last week cleared 20, but once again it was just a temporary thing as it ended up closing above that level just once. It saw a pair of closes above it in June and just one above it in December, making 20 the new number to watch. As worry of a debt default dissipated, so did volatility. But with no deal yet inked, this index should still be watched closely.
Notable Names:
PCRX is building an ascending triangle pattern here as it sees dips get bought but lateral resistance overhead. I’m leaving this one on watch for now until price pressures resistance, volume picks up, or this base tightens further.
KKD is sitting just beneath the highs and has rested the past few days, but I’d like to see price start to pressure the highs a bit more before setting up a play. As a result, I’m keeping it on the radar for now.
CERN is a stock that has shown considerable volatility in the last couple of weeks but price is starting to form a narrowing base. I’d like to see this base mature before considering a swing. I’m also waiting for some better upside volume even to set up a single-day play, so this one remains on watch for me tonight.
ORLY has been highlighted here as a single-day play, a swing candidate, and now once again I like it for a single-day play. A swing stop is just too wide here, but a breakout to $128.55 does interest me, so I’ll just look to take it for the initial move if that level is cleared on Monday.
FCX is coiling here beneath a descending trend line and a turn up could generate interest. Upside volume hasn’t been impressive the last two sessions, but price is near a breakout so I’ll give it a shot for a single-day play on Monday if it can clear the hurdle.
FB is stalling out here on the post-flag-failure bounce. The last 2 closes were weak and price is respecting the former flag, so I’m interested in a single-day play on the short side if price undercuts $48.60 on Monday.
YELP is testing former rising support from below after breaking it last week. Volume is declining on this bounce, so I’m interested in a single-day play on the short side if price turns lower to break $65.90.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for better risk/reward opportunities and cleaner patterns.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
