Good evening StockBandits!
Despite the fireworks of last week and the expectation of lighter volume and reduced activity this week, stocks just didn’t slow down. Across the board, gains were posted as the indexes continued to paint new multi-year highs. The bulk of the gains came by way of an overnight gap, although we did see some buying occur between the opening and closing bells.
At this point, stocks have become a bit short-term extended and due for a rest. It would be ideal if that rest occurred in the coming few days with Christmas and New Year’s while the attention of traders turns elsewhere (as it should). Over just the past 4 sessions, we’ve seen key support areas tested, a sharp upside reversal, breakouts through resistance zones and even some follow through. It’s been a bit of a whirlwind, but one which the bulls can certainly be proud of.
Tomorrow will be a half session with an early close (1pm ET), and I’d expect volume to taper off pretty aggressively as the day goes on. For this reason, there are only a few setups which interest me, and each of them are only for cashflow trades which I don’t expect to last but a couple of hours max. I’m going to stick with my current swing positions, and have modified stops on the table below so if you’re following along be sure to check it. These are aggressive stop adjustments as I would prefer to lock in current gains upon any turn lower in prices.
** With Christmas this week, I’m going to step away for my final week of vacation this year. This will allow me some time to spend with family, and let me rest up and recharge for 2014. I highly suggest you doing the same, as it’s just so important to learn from the year behind us and plan what we can for the year ahead. I’ll return January 2nd with the next report.
Merry Christmas to you, and let’s make 2014 a year to remember!
Let’s get to the charts.
NAZ – The NAZ gapped higher and then added 12 more points by the end of the session today to post a 1% gain. Given the strength since last Wednesday afternoon, today was a very impressive day. The bulls had a chance to sell the gap and lighten up, but they instead stayed the course. Their resolve can’t be questioned, it’s just a matter of when a rest finally arrives.
SP500 – The S&P gained a few important points today to add to the breakout from Friday. There’s not a lot of room between tonight’s closing level and the 1813 former resistance level, but every point counts. Volume was below average today, and likely will stay there for the remainder of the week.
RUT – The RUT daily chart is funky on two different data providers, so tonight I’m using a line chart. The finish at 1157 tonight gives this index 10 points of wiggle room down to 1147, former resistance. That’s almost 1%, which isn’t much considering this index just rallied off the 1100 area 10 days ago.
DJIA – The DJIA put together another solid day with early gains being held and a finish not far from the session high. This index also looks a bit stretched after a quick rally off the mid-December low, but the bulls will want to hold this breakout in order to maintain their psychological edge as much as anything.
Notable Names:
AAPL added over 3% today on news of a deal with China Mobile, a company with over 700 million subscribers. The incredible potential that could provide for AAPL still only resulted in a 3% gain in the stock, which goes to show that some things just tend to be priced in to at least a degree. Headlines might make some things official, but they often seem to be interpreted in line with the existing trend. In this case, positive news within an uptrend.
LEN posted a solid day, as did many other homebuilders. This was a particularly good example to highlight though, as price just rallied 12.8% off the low of last Wednesday. That leaves price a bit stretched here right after a breakout, making this a tough one to chase. A pullback which holds the breakout zone would be much more interesting.
VIPS was highlighted here last night but gapped through the trigger. It kept running, and still looks to have some room. As a result, it looks good for another single-day play if it can clear $85.80. If the market quiets down, momentum players will likely flock to the handful of bigger movers on the week, which would include this one.
WWW is nearing resistance here after basing for a few weeks. Price isn’t yet pressuring the lateral trend line, but it could punch through any day now. I like this for a single-day play above $33.40 to participate in the initial breakout move.
TSLA is standing out in recent sessions as relatively weak after reversing lower from the $155 area last week to break rising support. Despite two advances the last two sessions, price hasn’t reclaimed the breakdown zone. It looks vulnerable to another selloff, and given the small pattern in play here it has the most appeal as a single-day play on the short side as it undercuts $142.
New Swing Trade Candidates:
No new swing candidates tonight. My current watch lists are very limited, and I’m just not seeing any setups which offer a risk/reward I can’t live without. It’s also Christmas week and the market is extended, making it difficult to get long when a rest is needed (and difficult to short while strength remains in place). I’ve tightened my stops on open positions in order to lock in gains on any turn lower in prices.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Merry Christmas!
Jeff
