Good evening StockBandits!
A mid-day downtrend ultimately proved to be the difference-maker in today’s session as stocks finished lower across the board. We saw some morning chop and a late-day lift off the lows as the bulls saved face, but in between there were a few hours of steady selling. That translated into a broken uptrend channel for the DJIA, and a test of a recent key level for the RUT. Elsewhere, the NAZ and S&P simply pulled back a bit further from their recent highs, yet stayed a considerable distance from their prior pullback lows.
What was a bit different about today’s session was that volatility did see some upside follow through with the VIX putting up its 6th consecutive advance. That took the fear gauge to its highest levels since mid-October with a push through 15, although it closed below it. Historically, elevated volume is anything north of 20, with extremes coming beyond 40. We’re a long way from there, but the shift is something to take note of as it may indicate more protection is being purchased (puts) than we’ve seen in awhile.
My watchlists were reduced with today’s action, as the weakness took the shine off some bullish setups and left some bearish setups either already in motion or starting to look slightly stretched. Tonight, there are only a handful of names which interest me for tomorrow’s session, with one new swing but most of them being single-day plays. I’m itching for some better-defined bases and patterns to play to increase my swing exposure, there just are very few of them right now. That’s requiring some patience, and it’s keeping the bulk of my activity right now on an intraday timeframe. I’ve long felt as a trader that diversifying timeframes is an advantage, but at the moment that’s more difficult given the narrow watchlists.
Let’s get to the charts.
NAZ – The NAZ only gave up 8 today after a 15-point lift from the session low this afternoon. For now, this is looking like yet another minor, short-lived dip which could get met soon with more buying. Time will tell, but dips have been kept shallow and brief in recent weeks and so far there’s not been a negative change of character to indicate this one is any different.
SP500 – The S&P declined for the third straight session, marking only the second time that has happened (week before Thanksgiving) since the Oct. 9 low. It’s leaning on the lower trend line of the rising wedge, making this a short-term spot the bulls will want to protect. The afternoon bounce erased more than half the day’s losses, so now we’ll see if the bulls want to put an end to the slide.
RUT – The RUT returned right to 1123 tonight, the breakout level from two weeks ago. The hesitation around that zone was ultimately met with a quick rally to 1147 during Thanksgiving week, but now we’re right back there and this is proving to be a battle ground for the small caps.
DJIA – The DJIA broke its uptrend channel today, as was noted here last night as a possibility. This is certainly a move to take notice of, but it doesn’t yet mean the Dow has entered a downtrend. Uptrends consist of higher relative lows and highs, which for now is still the case for this senior index. However, the channel break definitely marks a change of pace for this index, and brings greater importance to the next bounce. Should that rebound happen to stop shy of the highs, then a lower high scenario could unfold. So more technical evidence will be needed to establish a change of trend, but for now the character has changed enough to pay attention to and the dip buyers are exhibiting a reluctance to rush back in this time.
VIX – The VIX closed at 14.55 tonight, so we’ll keep this in perspective, but today marked the 6th straight advance for the volatility index and also saw its highest levels in over 6 weeks. That points to a move toward some protection and a little less complacency, which is something we’ll continue to monitor as we gauge the current market pullback.
Notable Names:
AAPL is getting a bit stretched after a quick $52 lift off key support and former resistance at $514. This stock continues to act well, it’s simply not in a spot where initiating new buys is prudent given the need here for some short-term rest.
TSLA saw its best day in nearly 7 months after a German probe into Model S fires cleared the company from fault. Paired with a hard selloff in recent weeks, this set the stage for quite the short squeeze today as shares opened just past $132 and closed above $144. With the broad market weak, this was a nice example of momentum traders flocking to one of the few names that was bucking the trend. Price is now facing the $145 area where it found short-term resistance last month, and is now up over 24% in just the last 4 sessions, leaving it short-term stretched. No play here, just an example of how technicals, emotions, and a headline can produce a big move.
X is looking good for a play on Wednesday if price can clear the trend line at $27. I like it for a single-day play above that level, as I’m only interested in participating in the initial push higher. Upside volume improved today but remained below average, and overall this stock has struggled to produce follow through for the past several weeks.
CSIQ is trying to perk up here but volume today was quite poor. As such, I’m only interested in a single-day play above $29.75 for Wednesday. Price looks to be completing a pullback and could see a quick lift, but I’m just not interested in a swing.
FB is stalling out after a bounce and still has lower highs in place. A move below $46.15 looks good for a single-day short as this one rolls back over to test the $45 area and perhaps even the low from last week.
TSL is looking heavy and a break below rising support at $13.70 looks good for a single-day play for Wednesday on the short side. This has been a volatile name in recent weeks, so I’d prefer to keep a tight stop and participate in the initial breakdown rather than hold it as a swing.
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.
NBL is wedging here after resolving a large base lower. There’s still room for a retreat, so I’ll get short for a swing trade if this one breaks $69.10 and will have a protective buy stop just above the wedge. I’ll be looking for a move down into the congestion zone from Sept/Oct as a target.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
