Good evening StockBandits!
The NAZ and RUT have held their ground incredibly well compared to the S&P 500 and DJIA, and I’ve been highlighting the discrepancies there. Eventually, something was going to bring them more in-line with one another, and today we saw some real progress on that front. It took a hard selloff to do it, but the picture as it stands tonight is a bit more in unison when weighing the averages.
Key high-beta names like YY, YOKU, VIPS, SFUN, P, YELP, SINA, SOHU, FB and LNKD were trashed to the tune of over 6%. Many of the more speculative small-cap names also took it on the chin, bringing the NAZ and RUT each right down to key levels I’ve highlighted here at 3694 and 1046, respectively. It was an all-out tantrum with another day of no progress in Washington, Obama calling out Boehner, and worry escalating enough to push the VIX past 20 for the first time since June.
I’ve been leaning short with my swing positioning and today triggered on another short (LGF) while being taken out of my long in PBR. The heating up of emotions means greater volatility and movement in the market, which could bring forth some new plays. Tonight, however, it’s just a matter of locating plays which look ripe for entries here, and there are very few of those. What I do see tonight I’m only interested in for a single-day play, so since there aren’t a lot of setups I’m going to spend a bit more time highlighting some example charts. After a big selloff like we saw today it’s not uncommon to see an inside day follow it, so we’ll see if a little of the dust settles tomorrow.
Let’s get to the charts.
NAZ – The NAZ failed its breakout last week and then today gave up 2% for a swift selloff right down to 3694, the low of the day. That corresponds to the early-August high and I’ve had it noted on every chart since then. This is a big level for the NAZ but if it’s lost then the next level to watch is for a 3660 gap fill.
SP500 – The S&P has been holding 1671 but today broke it and did so with a decisive move and a close at the low. This index hasn’t posted back-to-back advances in recent weeks and has been persistently weak since the FOMC meeting breakout promptly failed last month. Next level on the downside is the August low at 1627.
RUT – The RUT failed its breakout last week and had retreated toward 1063. Today it broke that level with some force, closing at the low to put it in a short-term correction like the others. This index had led the way up and now it’s attempting to play catch-up as it exhibited relative weakness today to the S&P. It’s trying to fill the small gap to 1046 here but beneath that are 1036 and 1008, respectively.
DJIA – The DJIA continued its slide today and now is testing the August low. Given the persistent weakness here, that may not hold and we could see a move back toward 14551 if so.
VIX – The VIX turned up today through the 20 level, which has only been crossed a handful of times since last December (the previous debt ceiling drama). We’ll find out soon enough whether this time will stick, but fear is on the rise and this validates the selloff we’re seeing in stocks. Historically, a VIX north of 30 is truly elevated and anything north of 40 has historically marked extremes.
Notable Names:
FB broke down hard today from the bull flag it had been sitting in. This stock may at long last be starting a correction after a truly remarkable double since July.
GOOG is approaching the low end of the $80 trading range and doesn’t have much room left before it tests the $844/847 area it has on 3 occasions respected since the spring. To see a leader rolling over like this with potential for a far larger breakdown is not something to dismiss.
YOKU showed today just how sharp the momentum can cut on the way down with a quick 10% haircut right off the high. When playing these fast moving high-beta names, it’s imperative to keep hard stops in place because they can make such decisive moves when the tide turns.
NFLX broke rising support today on heavy volume and like FB may finally be starting a correction. It certainly deserves one after the year it has had, but at a minimum this break of rising support highlights a change of character that should not be ignored.
LNKD has been in the process of topping but has lacked a clear pattern. First it broke rising support a few weeks ago, then it bounced back to fail at resistance a couple of times, and now it’s rolling over on very heavy volume. This is why it’s so important to take note of broken rising trend lines, as they often point to a change of character and soon after something more ominous can occur.
QIHU is another great example of the process of a shift of direction. This stock had been setting up in a bullish wedge a few weeks ago but never turned higher. Instead, it resolved that wedge lower, bounced back up in a feeble fashion with some weak closes, and then rolled over hard today to enter more of a correction phase.
NEM is a name I like here for a single-day play for Wednesday. A break below support to a new low at $26.20 could trigger a wave of selling as a new multi-month low is made. I don’t like the recent action enough to take it for a swing, but the initial breakdown here could be worth an intraday play so it’s on my radar for Wednesday.
RGLD is another stock in the same group as NEM which is facing key support here. A breakdown to $46.50 looks likely to trigger more stops, so I like it for a single-day play on the short side for Wednesday if price undercuts that level. Here again, I’m simply interested in participating in the initial breakdown rather than initiating a new multi-day swing trade.
New Swing Trade Candidates:
No new swing trades tonight, sticking with the existing list.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
