Good evening StockBandits!
The indexes took a breather today with mild pullbacks across the board. Interestingly, there was a bit of a flight to safety as both gold and bonds popped to add to their recent lifts from short-term lows. The VIX also saw a modest lift, but the averages didn’t slide much. Each of the indexes painted their highs within about the first hour of the day before sliding to their lows by mid-afternoon. A few hours of lateral price action left stocks right near their lows by the closing bell.
The lack of buying interest today after a big bounce Friday and a day of rest Monday gives the appearance of no follow through. Granted, there’s still an opportunity for stocks to vault higher and today’s downside was limited, but that’s about the extent of what we can derive from today’s action.
There are some mixed signals among the averages from my viewpoint, with the DJIA in danger of a lower high and the RUT having just carved one out. Meanwhile, the NAZ is looking tired and the S&P is showing a reluctance to break out despite having opportunities in each of the past two sessions to do so. All of this doesn’t make for a real bearish environment, but given my limited watch lists on both sides of the tape, it serves as a reminder to stick with abbreviated timeframes until more technical clarity arrives.
That’s what I’ll be doing on Wednesday, with just a handful of cashflow trades. Let’s get to the charts.
NAZ – The NAZ saw a single-digit decline today but a finish off the high Monday and then some downside today gives this chart the look of fatigue. Yes, it’s still just a short distance from its highs, but there’s ample room here for a pullback and today saw an increase in volume. Any early strength which gets sold could quickly see an acceleration in profit-taking as the end of the year draws closer by the day.
SP500 – The S&P just respected the high again to keep the range intact with a modest decline today away from 1813. There’s room down to the 1775 level before a meaningful break would occur, but lasting momentum hasn’t been present in this index since October.
RUT – The RUT gave up 1123 today after multiple tests in recent sessions. Also of note was the fact that the bounce last week has been completely erased on a closing basis. The last dip found support at 1111, now just 8 points away. A lower low could set the tone for more intense profit-taking, so I’ll be watching 1111 closely.
DJIA – The DJIA broke its uptrend channel and then bounced into Monday’s high. That high stopped roughly 116 points shy of the 11/29 high of 16174, setting the stage for a possible lower high. Price is now starting to retreat again, so if we see a break of 15791 in the days ahead it would add great validity to the argument that the Dow is trying to change directions after a huge rally off the October low.
Notable Names:
BIDU was listed here last night and I mentioned that I didn’t trust the breakout. That was based on prior breakouts above lateral resistance levels in recent months. Today the stock vaulted higher to exhibit excellent follow through – just the opposite of what I had expected. Sometimes, I’m just dead wrong! Rather than be upset though, I’ve found that sticking to a process and staying consistent has helped me over time. When I recognize recent behavior on multiple occasions in a stock, I expect it to continue until it finally changes. I certainly missed this trade, but would actually avoid it again if I were facing a similar setup due to the indecisive nature of the past few breakouts.
AAPL is in a holding pattern here as it churns on the heels of a big rally off $514 support. This is healthy overall, but it adds importance to the direction of the next break as that could easily set the tone for this stock for the next few weeks.
SFUN turned up today after a multi-day pullback and now is facing a short-term trend line. A push through $72.60 looks good for a single-day play on the long side for a possible quick run back toward the recent high. The last lift only lasted 2 days in this stock and it’s a volatile one, so I’m just not interested in taking it overnight due to the wide stop it would entail.
OPEN has pulled back off its recent high but now is challenging the descending trend line. A break above $82.50 could spark some buying interest in this stock. The last bounce high was just above $85, making that a logical area this one could test. I’m only interested in participating in the initial turn higher, so this will only be a single-day play for me if it goes.
VRTX has pulled back but is trying to stabilize here. A break above $67.30 looks good for a single-day play, but I’m not looking for lasting upside based on this pattern and the recent indecision in the stock.
HOS is knocking on the door of short-term support and a break below $48.90 could allow this stock to retrace at least some of the bounce from late last spring. I like this best for a single-day play as the last couple of declines have been very fast followed by consolidation periods.
SLB has taken on the look of a large, rounded top on the daily chart. Price is now resting just above a key level, which if broken, could spark some short-term selling. I like it for a single-day play on the short side if it breaks $86. An appropriate stop vs. next support simply doesn’t provide a real attractive risk/reward profile for a swing.
New Swing Trade Candidates:
No new swing trades tonight, watch lists are still very limited and there’s a lack of good risk/reward setups. I will share new swing setups here as they come available, but for Wednesday’s session I’ll stick with my existing exposure and otherwise look to intraday cash-flow plays.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
