Good evening StockBandits!
The indexes painted an inside day today on the daily chart, unable to make any additional progress on the heels of Friday’s push to incremental new highs. The bulls, for whatever reason, simply aren’t pressing their short-term edge here and are instead allowing stocks to churn and coil near their recovery highs. Whether that gets resolved to the upside or not remains to be seen, but the buyers are hesitant here and not feeling any sense of urgency to put more cash to work.
Technically, there’s still nothing to complain about. The trends are up and we’re seeing prices generally rest on quiet volume, which is favorable for the bulls since it implies very limited turnover taking place here. Some wider-ranging bars on heavier volume would indicate more turnover occurring as those sitting on profits flip out shares to buyers, and thus could start to raise some questions as to the health of the rally. However, even under the surface about the only issue to raise here is the fact that most stocks just haven’t seen any healthy profit-taking in several weeks. That leaves some of them looking extended while others simply base laterally.
Given the lack of buying enthusiasm after this multi-day channeling action, I’m staying pretty selective here. I was stopped out of a 1/2 position today (RGR hit my adjusted stop) and removed one more setup from the list (YPF is rolling over to negate its pattern without ever triggering). Aside from that, I’m content with the exposure I currently have, so if the tape strengthens I should benefit from it. On the other hand, should the market roll over, I’m not immediately interested in establishing some new positions. As such, I’m going to be patient with new plays for a couple of days until we see more of a shake-up or some more impressive momentum begin to surface. Until then, I’ll of course take the clean setups that emerge but am reminding myself to keep high standards. Tonight the best setups I see happen to be on the short side, which could act as a nice hedge should we see this market weaken.
** One more note is that I will not have a report on Tuesday evening this week as I’ll be speaking to the Phoenix/Scottsdale Traders & Investors Group. If you’re in the area, I’d love to see you there (details on the homepage). I will be back on Wednesday in time for the usual report.
Let’s get to the charts.
NAZ – The NAZ churned beneath 3196 today after tagging that level on Friday. Today’s lack of follow through was not negative, however, as prices stayed in a very tight intraday range with extremely light volume. Bulls will want to produce a breakout and follow through here sooner than later, as the absence of a breakout would leave them looking as if they lack resolve.
SP500 – The S&P held its ground today and sits just shy of 1518, the 52-week high set last week. Volume is tapering off here though, so that will need to change if we see prices attempt to push higher again. The all-time high is at 1576, which isn’t far, but the bulls have been laying low for a couple of weeks now.
RUT – The RUT painted a tiny bar today which was just 3 points from the low to the high. This index is sitting at its high of 913 here, and even though the pace has slowed in the last couple of weeks, we still have yet to see a negative change of character emerge. It’s up some 20% since the November low, but still in shape to build on that rally after this basing action.
DJIA – The DJIA churned further today to stay within arm’s length of 14022, the high set on Friday. This high channel is a bullish look overall, but needs to be met with a solid breakout on strong volume to get the next move underway. The all-time high isn’t far from here, but the bulls don’t seem eager to challenge that level just yet.
Notable Names:
RGR had hit Target 1 for me last week to allow me to book partial gains on the initial push out of the wedge pattern. Today, the stock came under pressure intraday with a swift selloff which hit my raised stop for remaining shares. Whether it was selling ahead of tomorrow’s State of the Union Address by Obama (and possibly stricter gun control laws) or something else doesn’t matter. The new high this stock just achieved now looks like a failed breakout attempt, so I’ve taken my gains here and am leaving it alone for now.
URBN is a good example of a stock that might be in transition here with a gradual change of direction possibly underway. More selling will need to confirm this, but this chart is starting to take on a bit of a “rolling over” look with Thursday’s new high, weak finish, and some modest selling on Friday and today. When I see a chart with this look, I get very cautious despite the fact the trend hasn’t yet changed.
CRUS is turning up here to pressure the upper trend line of this wedge, but volume is nowhere to be found. Price is facing a resolution here in the next couple of days with as tight as this wedge has become, but this simply isn’t a trustworthy setup for me due to the lack of volume. It might pop big without me, but this is an example of how I’m trying to maintain a high standard for new plays right now.
INVN is perking up and looking like it could leave this bull pennant any day now. Today’s strong finish and heavy volume are no doubt bullish, but an upside breakout entry and a downside breakdown stop loss are simply too far apart here for me. I’d prefer to see this one tighten a bit more with some additional lateral consolidation, otherwise it’s a momentum type of setup but not a swing setup for me.
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.
LULU has repeatedly tested and respected the $66 area from both above and below in recent months. Here we are seeing price driven lower by a trend line and it’s now approaching the magic level of $66. I’m watching for a breakdown through $65.50 to trigger a short sale, which I believe would create a nice risk/reward setup. Some short sided exposure would also serve as a hedge to my current long positions, which is just a benefit here and not a reason to take this play.
CCI broke out recently but promptly failed and rolled over on heavy volume, depicting distribution. Since then, it’s been unable to bounce and now rests just above an important level. A breakdown through $69.60 will trigger a short sale for me as this one retraces further toward the mid-60’s. I’ll use the small descending trend line just overhead for an initial stop.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
