Good evening StockBandits!
Amid a government shutdown and ongoing sources of concern, last week the bulls procrastinated on a deeper correction and stood their ground. We did see the blue chips retreat a bit earlier in the week, but a bounce ahead of the weekend signaled some confidence that either a deal in Washington would be reached or simply that the bulls aren’t all that concerned.
The lack of downside in the NAZ and RUT – the two more speculative indexes – points to a persistent appetite for risk as the 4th quarter gets underway. Rather than pulling back, they have merely moved laterally of late. Funds and money managers generally underperform, so as the year edges closer to completion there’s some performance anxiety by those who are lagging to make up some of the difference. They know some of their assets will find a different home if they fail to meet or exceed the standard, so the hot money has still been in play for the high-beta names. That’s subject to change on any given day, but thus far these two indexes have held up very well.
Meanwhile, the senior DJIA and S&P 500 indexes have seen a retreat off their September highs but it has been rather orderly. The lack of panic-driven selling has produced a number of declines over the last couple of weeks, but according to the daily charts there’s a fair shot here at a higher low being established once this dip gets completed. We’ve thus far stopped shy of the August lows (and still have some room in that regard), so the stage is set here for a buyable dip if the bulls want it.
Overall, we remain in a very tricky environment with great sensitivity to headlines and mixed performance among the indexes. There has not been an abundance of great setups because of this, which has prompted me to back off a bit and stay selective. I’ll continue to refrain from lowering my standards, knowing that eventually some better risk/reward profiles will come along. They always do – the key is simply not spinning our wheels or losing objectivity while we wait.
Let’s get to the charts.
NAZ – The NAZ cleared 3798 last week, gave it up, then reclaimed it on Friday. It still is seeing dips get bought and the overall trend remains up, which opens the door for higher prices. Given the many reasons for concern lately, this index is looking extremely strong.
SP500 – The S&P failed its 1709 breakout a few weeks ago and retreated to test 1671 last week (twice). It is now turning back up but needs follow through to confirm a higher low. I’d expect 1709 to be respected on the way back up, but then there’s room back to 1729 at the all-time high.
RUT – The RUT broke out last week to a new high but slipped back inside its short-term trading range. It’s only a few points from the high and could get back on the move pretty easily. This index hasn’t seen many breakout failures since it crossed 1056 in early August before pulling back for the remainder of that month. Will this similar setup produce a different outcome? The bulls certainly have a shot to twist the knife here if they want to.
DJIA – The DJIA continued its downward channel last week en route to a 186-point decline on the week. However, a higher low could be in the cards for this index if price can turn up and clear the upper channel line around 15100. That would open the door for some upside follow through – something which has been missing lately – toward the 15400 area.
Notable Names:
FB is in a small channel here after the persistent 2-week runup and that leaves it with a bull flag. This stock still needs rest after such a large advance, but a breakout through $51.70 to a new high looks good for a single-day momentum play.
GSVC is at resistance here and volume picked up Friday with a minor advance after a bit of a shake-out earlier in the day. A new high at $15.65 looks good for a single-day momentum play here but a swing stop would be rather wide so I won’t be taking this one overnight.
SHLD is sitting in a tight little bull pennant here and a turn up through $65 looks good for a short-term pop. I like it for a single-day momentum play for Monday if that level gets cleared, but would prefer to see a larger pattern to consider for a swing given the volatility of this stock.
SLW is looking heavy here as it repeatedly tests short-term support. A break below $23.50 could trigger more selling, so I like it for a single-day play on the short side if that level gets broken on Monday. Here again, a swing stop would belong above the consolidation and that’s just too far away for my taste to justify a swing.
TGI is sitting in a rising wedge here within a downtrend and could easy resolve lower any day now. A break below $70.20 looks good for a momentum short sale for Monday.
New Swing Trade Candidates:
These stocks look ready for imminent multi-day moves. Pattern confirmation occurs with a move through the entry level. Initial stop and target levels are also provided.
ORLY is still basing here in the upper portion of this $7 wide trading range and a breakout could deliver a measured move. I’ll get long for a swing trade if $128.55 is cleared as that would set the next advance in motion.
GME has gotten squeezed here by recent support and a descending trend line and may be ready to go. A turn up through $51 will trigger a buy for me as a swing as this one resumes its uptrend.
PBR has pulled back quietly the last couple of weeks and now the descending trend line can be used as a pivot for a turn back up. I’ll be a buyer upon a push through $15.85 as this one heads back up to test some prior levels from early in the summer and continues its recovery.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
