Good evening StockBandits!
The market struggled last week across the board with the major indexes shedding 1.5% to 2.1%. The bounce from the end of the prior week was completely erased, and downside volume picked up. The failure created a lower high for the S&P 500, the DJIA, and the RUT, turning the short-term direction downward. Needless to say, it was a big change of pace for this market which has been so persistently strong since the October pullback low.
If a Santa Claus rally is going to happen, he’d better hurry! There seems to be quite a bit of expectation for one, which means there’s ample room for a painful surprise if instead we see some more intense profit-taking set in as the end of the year approaches. Anything’s possible, it’s just a matter of keeping an open mind and understanding that it’s the price action and not predictions that will ultimately give us opportunity.
Over the next two weeks, keep in mind the year-end cross currents I’ve discussed here several times since December began (tax-related selling, fund redemptions, window dressing, index rebalancing, etc.). I’ve found that backing away a bit more at the end of the year has helped me, as rarely do I make big strides in either direction this late in the year. Instead, start shifting a bit more toward reviewing the year behind us to determine what you can learn from your trading and apply for greater success in 2014. It’s right around the corner, and some time studying your trading habits this year would be well spent.
Let’s get to the charts.
NAZ – The NAZ gave up 61 points last week with a feeble Monday lift to new multi-year highs followed by heavy price action into the remainder of the week. It established a lower short-term low (red line) as it broke below 4004 from early this month and ultimately finished right at 4000. Next level to watch is 3966 from October, as a break below that could see profit-taking accelerate.
SP500 – The S&P saw a minor advance last Monday which stopped shy of the 1813 high to make a lower high, then rolled over hard to test the 1775 area where it ultimately finished the week. This has been a big level going back to October as we’ve seen it serve as both resistance and support in Q4. A downside break would open the door to 1746 as next lateral support.
RUT – The RUT led the way lower last week as cash got raised aggressively in small-caps. That brought a lower high and a lower low with a 2.1% decline in this index. It’s now 40 points off its recent high, and just a short distance from the next lateral level of 1096 where support was found in mid-November. The late-week bounce wasn’t impressive, and I’d expect to see 1123 serve as resistance now that we’ve seen such a decisive break below that level.
DJIA – The DJIA shed 264 points last week as a poor finish to Monday’s advance segued into a hard selloff mid-week. That brought about a test of the September high and now leaves this index with both a lower high and a lower low. Upside has been rare over the last couple of weeks, with the jobs report rally the prior Friday standing out like a sore thumb in what has otherwise been persistent weakness.
Notable Names:
GOOG is pulling back after making new all-time highs with a trio of declines to end last week. This dip has taken price back below its recent lateral breakout zone, as well as below rising support. That pair of bearish technical events shouldn’t be ignored here and that could mean narrowing leadership in the tech sector as both GOOG and AAPL are trying to roll over. Social media stocks FB and TWTR are looking very stretched, so where will the hot money flow?
UA is trying to base near highs here but could stand to put in some more lateral work here to perhaps construct the handle portion of a high cup and handle pattern. A breakout would occur above $86.10, but I’d prefer to see some lateral price action first, so this one will stay on my watch list for now.
VISN is running hot after gaining over 49% in just the last 8 sessions (more than TWTR). These little momentum stocks can certainly make great strides quickly, but momentum cuts both ways and that needs to be remembered.
QIHU is still looking heavy with this large head and shoulders type pattern. Price is nearing the neckline again but I’d like to see it get a bit closer before setting up a play. Every day of lateral price action here will not only bring price closer to the neckline but will also help to carve out a swing stop. Fingers crossed, it waits another day or two before breaking the rising trend line.
FI looks interesting here for a quick play on the long side if it can clear the trend line at $26.60. Given the large unfilled gap from November, I’m only interested in participating in the initial pop if it occurs, so this will be a single-day play for me if it goes on Monday.
SLB is still on my list for a single-day play on the short side as it repeatedly tests this key area of support. I’ll take it for a short sale if it breaks $85.80 to make a new pullback low. My expectation is that the initial run of stops could produce the best move, so that’s all I’m interested in participating in.
UTHR is breaking down here but could see follow through selling. I like this one for a single-day play for Monday on the short side if it breaks $87.80. A swing stop is too far away, price is already breaking down, so this is best for a momentum play.
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.
FNSR has seen a change of character the past couple of weeks after a big correction. A turn up through the trend line at $22 would trigger a buy for me as a swing trade, and I’d be looking for a return to the key zone at $23.75 as my target. I’ll keep a tight stop at a multi-day low in case of a reversal, as I’m expecting quick follow through if this one turns back up from this minor pullback.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
