Good evening StockBandits!
The lack of upside streaks in the key averages continued today as Friday’s strength found zero follow through. That has been the case for nearly 3 weeks now as advances continue to be sandwiched between declines. Today it was the lack of weekend progress made in Washington being blamed for the weakness with a downside gap to kick off the week. There was a partial gap fill attempt made for the opening hour, but from there stocks essentially spent the remainder of the session chopping around laterally with no momentum seen in either direction.
Although each of the indexes gave up similar ground, the NAZ and RUT were able to maintain their high-level congestion zones for another day. Elsewhere, we saw the S&P 500 and DJIA each make new pullback lows on a closing basis to continue their retreat from their September highs. The DJIA has given up nearly 800 points in less than 3 weeks, and if no deal is made to pacify Wall Street we could see worries intensify as the debt limit approaches the end of the line (Oct. 17).
My bearish watchlist grew a bit this evening as more stocks came under pressure, although I did trigger on one long from last night. Even though it’s looking like there’s no deal in sight for Washington, the fact is that the situation could change quickly and the market will likely rip higher if it catches wind of progress toward a deal. That potential offsets the growing fear of no deal, which make for a very tricky trading situation right now. If ever there was a time to be careful with becoming loaded up in a single direction, this certainly qualifies. As such, tonight I’m mainly targeting single-day setups for Tuesday with the addition of one more swing candidate.
Let’s get to the charts.
NAZ – About the worst things that can be said right now about the NAZ are that it hasn’t paired advances since mid-September and it just failed its minor breakout with a move back inside the congestion zone. The picture could certainly deteriorate from here, but as of yet this index sits a relatively short distance from highs and the uptrend is still intact.
SP500 – The S&P gave up almost 1% today and now sits just a few points from 1671 support. That level has been tested a few times since last week and over the summer has been respected from both sides. A break below it would serve as a downside resolution to the past few days of basing action and opens the door for a potential move to 1627 as next support.
RUT – The RUT is only a couple of points away from 1063 tonight, which is an important level that has held in recent weeks despite multiple tests. A move beneath it would pave the way for a deeper pullback for this index.
DJIA – The DJIA stayed within its channel today after an inside day on Friday and made new pullback lows since it peaked post-FOMC in mid-September. Next support is the August low at 14760, now less than 180 points away.
Notable Names:
SHLD was listed here last night and maintained its pattern today, so I’m eyeing it again for Tuesday for a single-day play on the long side. This one could pop if it is able to clear the pennant at $65.
SCCO is not yet acting bullish but it has corrected from its September spike and has stabilized in the past few days. A multi-day high could see a quick lift, which is all I’m interested in. This sets up a single-day play on the long side for Tuesday if price can clear $27.50.
FLTX has been highlighted here a few times lately and it remains weak. A break to a new low at $32.25 looks good for a single-day short on Tuesday as more stops get run and price heads lower again in search of buyers.
SEE is still acting heavy here and a new pullback low at $26.40 looks good for a single-day play on the short side for Tuesday as the correction continues.
SLW was listed here last night and the same setup is valid tonight so I’m relisting it. This one looks good for a single-day play on the short side for Tuesday if price breaks $23.50 to trigger more stops en route to lower prices.
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.
LGF is struggling in recent weeks to maintain the uptrend it had, and now a lower high appears evident on the daily chart. I’m watching rising support for a break at $35.50 to get short for a swing trade as another leg lower begins. I’ll have a protective buy stop above the bounce high of last week, and will be targeting a test of the September low and the late-July congestion zone. Earnings are nearly a month out, so there’s some time for this one.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
