Good evening StockBandits!
The pullback from Tuesday’s morning high continued into today as the averages gave up a little more ground. Most of the downside came by way of an overnight gap as the futures deteriorated steadily from Tuesday’s closing bell into early this morning to produce a downside gap on today’s opening bell. From there, a bit more cash got raised into mid-morning when a bounce arrived. That marked the low of the day, and we then actually saw some modest buying on the dip, although it wasn’t quite enough to erase the deficit. By the closing bell, the indexes finished in the red but it was anything but an ugly day and there are clearly plenty of bids beneath this market after all the recent strength.
Today’s mild pullback is a welcomed sight for many of us. Whether a bull seeking to put cash to work, or a bear hoping for lower prices to cover shorts, even a minor dip after such a huge 2-week rally can alleviate some pain and frustration. At a minimum, it allows the market to take a breather, which the stretched indexes and extended individual names badly need. Every day spent moving laterally here will help to establish some new bases, and the pullback from Tuesday’s peak also now provides a reference point we can utilize in the days to come.
What I’m seeing in the charts tonight is much like in recent days, which are quite a few new bases which still need work in order to complete their patterns and create new multi-day plays. I do think we’ll see that, but it’s just requiring some patience at the moment to maintain high standards and allow cleaner setups and better-defined levels to emerge. Every single day the charts change, but as of tonight the only setups I’m seeing are ones I simply don’t trust beyond a single-day play. As such, that’s what my focus will be for Thursday’s session.
By the way, be sure to submit your tickers for tomorrow’s Charts on Demand video. You can either reply to this email or use the form inside the member area.
Let’s get to the charts.
NAZ – The NAZ pulled back today with a downside gap to 3907. It traded down to 3887 before rallying right back up to finish where it began the day at 3907. What’s important here is that (1) it’s trying to rest, and (2) there’s still a bid beneath this market. Dip-buying has been rewarded consistently and after a 2-week vault higher there are aggressive buyers at lower levels, which helped prices finish nearer their highs of the day than the lows even on a down day.
SP500 – The S&P put in some needed rest today with a modest pullback of just 8 points. This index also saw an intraday bounce from its low, and was able to hold above the 1733 minor gap from last week, as well as the prior high of 1729. This index could undercut both of those levels without threatening the trend, as it has ample room to retreat and still form a higher low relative to the Oct. 9 low of 1646.
RUT – The RUT gapped lower as well today but also exhibited some dip-buying with a finish near the high of the day even though it finished negative due to the overnight gap. Any continued pullback could target the unfilled gaps to 1102 and 1079, and any further basing action would be healthy as this small-cap index digests a huge 2-week rally.
DJIA – The DJIA returned to the 15400 level again today, staying comfortable at that level for whatever reason. It’s still nearly 300 off its high, but some additional basing action for this index would serve it well after the recent 800-point lift from the Oct. 9 low.
Notable Names:
PRU is starting to roll over just a bit here in the short term after reaching an area of resistance, but given the intermediate-term and long-term trend is up for this stock, I’m just not interested in shorting it. I’d much rather wait and consider it for a play on the long side upon a push through resistance because the larger pattern here is a continuation setup for the existing uptrend even though in the short-term it’s channeling sideways.
JKS is an example of a stock that’s attempting to base here but still needs more time before some better-defined levels can be drawn. I’ve highlighted a pair of parallel lines in dashes here, but still don’t see a play. This stock could stand to rest further, like many others tonight, so I’m giving it time while waiting for a higher-quality pattern to mature.
EVHC is still sitting not far from recent resistance but is not yet pressuring a breakout after a minor 3-day retreat. I’m keeping this one on watch, but it just isn’t ready yet for a play based on price not bumping up against resistance and no real upside volume. Times like this in trading simply require patience in order to avoid forcing trades in sub-par setups. A couple more days could mean all the difference.
NXST was highlighted here last night but did not trigger a play and instead price turned away from resistance. The base is still building, so this will stay on my radar even though it’s apparently not quite ready to go yet.
JOY does look ready for a play here. Price has returned to multi-week resistance and a push through $55 could propel prices quickly higher as a multi-month high is made and the recovery continues for this stock. I’ll take it for a single-day play above that level, as a swing stop simply is not apparent here.
GMCR is at support again and could continue its stair-step downward as soon as tomorrow. A break below $61.80 may finally allow the stock to fill the rest of the gap toward the $59.50 area, so I’ll take it for a single-day play if it breaks support. Here again, there’s no swing stop clearly defined so I won’t take it for an overnight.
SWI is still hugging rising support and a break below $35.90 looks likely to trigger some selling. If it undercuts that level, I’ll take it for a single-day play on the short side, but I’m not interested in a swing due to the failed breakdown earlier this month (ie: limited staying power on the downside).
CVI is stalling out here with finishes off the daily highs in each of the past 3 sessions. There’s a steep rising support line which price is now leaning on, and I like this setup for a single-day play on the short side if it undercuts $40.70. Next support is the $38 area from late-September, which price could respect.
New Swing Trade Candidates:
No new swing candidates tonight, still waiting for cleaner setups which offer better risk/reward opportunities than what is currently available. Any continued basing action in the broad market should immediately benefit the search for higher-quality patterns.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
