Good evening StockBandits!
Following the massive debt ceiling rally and a weekend to weigh their options, the bulls returned today with nothing to prove. The recent gains weren’t added to, but neither were profits taken as stocks made incremental new highs in the morning before a mostly lateral drift with a slight downside bias for the remainder of the day to finish mixed and little-changed. The trading ranges were kept narrow and excitement was distinctly absent on a day that truly felt like a Monday.
I’ve been noting that the early October slide and subsequent V-shaped rally ever since has left very few charts of interest, particularly for a swing timeframe. Instead, I’ve opted mainly for some intraday plays, and there have been some good opportunities on the shorter timeframes. Of last night’s candidates, for example, three triggered entries with two of them moving more than 3.8% while the other failed and promptly stopped out for the standard 1%. That doesn’t equate to a giant day, but it’s nice cash flow for an otherwise quiet session and that adds up by the end of the month.
My game plan remains the same for now, which is to continue working the charts in search of quality setups for some possible swings. While waiting for some tighter patterns and more mature bases to form, I’ll take what the market is offering even if that only means single-day plays. I just don’t see the appeal in forcing new positions here after such a violent rally when some rest and/or profit-taking looks so likely.
Let’s get to the charts.
NAZ – The NAZ edged higher today but didn’t exhibit the same enthusiasm of the previous 6 advances which all saw gains of at least 23 points as well as closes at the highs. Instead, it added 5 points and finished basically in the center of the intraday range, which just shows some fatigue after the sharp runup from 3650 on Oct. 9th. Any profit-taking could target the unfilled gaps which stand at 3863 and 3794.
SP500 – The S&P also saw strength dissipate today with just an incremental gain on today’s session and a finish in the center of a narrow intraday range. This index also remains extended and due for some rest, in which case I’ll be keeping an eye on 1729 and 1709 as recent levels of importance which price may respect on a dip.
RUT – The RUT actually finished negative today, although it wasn’t exactly a big nasty downside reversal. This index did make a new all-time high intraday at 1117, but should we happen to see more selling in the days ahead I’ll be watching the unfilled gaps to 1102 and 1079 as possible levels which price could respect.
DJIA – The DJIA rested today with a very small decline as it hovered near 15400 for another day. This index is still more than 300 points off its all-time high, but some 670 points off its recent low, giving it plenty of breathing room should it happen to see some profit-taking kick in. Under that scenario, we’d need to be aware of the lower high which would be formed on the daily chart, but we’ll shelf that discussion for now.
Notable Names:
JCP is an example of a downtrend carrying much farther than may seem logical. The stock has undergone a serious correction since its 2012 peak of $43.18, including a 68% slide just since May. It’s still sliding and who knows where it stops. The point here is that buying based solely on depressed prices can in many cases mean early (wrong/painful) entries, whereas waiting for some actual bullish price action can greatly improve the odds for upside continuation. So far, JCP just hasn’t shown the ability to stabilize, much less advance.
DRYS is an example of why I prefer to wait for breakouts from patterns, as just last Thursday I discussed in the Charts on Demand video the upper trend line needing to be cleared around $3.60. That didn’t happen, and the stock is now threatening $3. Waiting for a level or a trend line to be cleared opens the door for follow through, so I’d rather pay up than enter early.
AAPL is finally through the $514 level as of today’s advance, opening the door for a test of the next upside level at $555, the January high. This stock is being embraced more and more as the recovery continues with share prices still some $184 off the high from last September.
DIS is looking ready for a breakout attempt here but needs to clear $68 to do it. The stock has respected this same area on 5 occasions this year, validating this as key resistance. This one may be worth a trade above that level, but it tends to be a slower mover and therefore is not in my trading plan. I felt the chart was noteworthy with it being a Dow component and wanted to bring it to your attention.
TSL is on my radar for a single-day trade for Tuesday. I’d like to see it make a new high at $17.55, in which case price could accelerate out of this bullish ascending triangle pattern of the past 3 weeks. A swing stop would belong around $16, which for me is just too far away, so I won’t be taking it for a multi-day swing and am only interested in participating in the initial breakout.
HLF is hugging rising support here after recently failing a breakout. A turn lower through $63.50 looks good for a single-day play on the short side for Tuesday. Earnings are due out next week so there just isn’t much time to justify a swing entry with such a limited window of time for it to work. I feel like I’d be open to a max loss situation (if my stop were hit) with only a few days for it to make a move toward a target.
Z is another one that’s hugging rising support here and a break below $80.50 looks good for a short sale for Tuesday. This is a fast mover and with recent support not too far away, I’d prefer to take it for the initial breakdown as opposed to a multi-day swing.
SWI was listed here last night but did not trigger an entry today. The same pattern is intact, so I’m relisting it tonight with the same pivot of $35.60 for a short on Tuesday. As noted last night, due to the failure to hold the last breakdown, I’m not interested in a multi-day swing here but believe the initial breach of rising support could prove fruitful as an intraday play.
New Swing Trade Candidates:
No new swing candidates tonight, still in 100% cash waiting for new setups. The broad market remains very extended, making it a higher-risk spot to make new buys, while the recent strength has negated many bearish setups. Toss in the fact it’s earnings season, and it’s simply a day-to-day situation of waiting for new swing-worthy setups to emerge. Every single day of rest for this market will benefit the cause for new swing setups, so we could have some as soon as Tuesday or Wednesday.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
