Good evening StockBandits!
Stocks continued their rebound from last week’s low today with each of them reaching new recovery highs. Only the NAZ and RUT were able to post gains on the session, although the S&P and DJIA didn’t exactly see big downside reversals. The current lift is very extended here, which makes for some thin air for new buys on anything but the shortest of timeframes. This isn’t a spot to get comfortable, as the market has been anything but quiet in the past few weeks and we could easily encounter more turbulence.
To be short-term bearish here isn’t exactly stepping out on a limb. The market has ripped higher, is still beneath the highs, and is overdue for a rest or some profit-taking. That’s not a prediction that the market has seen its highs for 2014, simply an observation of typical price action whereby the proverbial rubber band gets stretched enough that an eventual snapback happens to some degree.
This lift from the correction low has been a violent one, but it’s not so much the bounce as it is the next dip which will likely shed the most light on the overall health of the market. If profit-taking is relatively quiet and orderly, then we might gather that further upside is in store. If instead we start to see more fear-based selling with a ramping VIX and some giant declines, then perhaps we’ll be in for a test of recent support.
Of the stocks on my immediate radar for new plays, I’m still eyeing the same 2 swing candidates which were added last night (neither have triggered entries yet) along with a handful of single-day plays.
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Let’s get to the charts.
NAZ – The NAZ jumped 6.5% off the low last Wednesday to today’s high, which is a huge spike higher. Interestingly, volume remained below average during this time, leaving price extended and without the added validation of widespread participation. Price carries the most weight, but it’s very stretched here and some backing and filling would not be surprising before the week is out.
SP500 – The S&P pulled back from its morning high today after stretching 5.1% from its low of last Wednesday of 1737. 1823 has been a key level and today it held again for the second straight day on a closing basis after being tested intraday.
RUT – The RUT added 3 points today but finished 5 off its high. It’s looking tired here after a quick 3.5% rally, and a dip back below 1123 would come as no surprise. Any turn lower could also add to the current appearance of a lower high.
DJIA – The DJIA saw an incremental new recovery high today but finished negative on continued light volume. This index is stretched but today’s rest was healthy. Can we see more, or will the buyers keep the pedal to the metal?
Notable Names:
AAPL again respected a key level today as it rallied right to $539 (October resistance, December support) before backing away to finish down a few pennies. It may prove capable of adding to the bounce, but this would be a logical spot to rest and today looked like the start of one.
ORCL has seen a big lift like many other stocks but is in no-man’s land here. It’s too stretched to buy, there’s resistance overhead, but it hasn’t started rolling over yet so a short is out of the question. It’s a hurry-up-and-wait situation in many other names as well.
NTAP gave a good example today of what can happen once V-shaped bounces run their course. To be fair, they don’t all happen this way, but when a lower high is embraced, the selling can return with a vengeance.
NQ cleared a wedge a few days ago and now is facing the prior high for a potential breakout. I like this setup for a single-day play if it can clear $18.55, but am only interested in participating in the initial push higher.
YRCW has lifted within this descending channel and now a breakout may be next. This channel is wider than it looks, due to the size of the bounce it saw last month. I like this setup for a single-day play on the long side if it can clear $21.60 to clear the upper channel line.
HAR was listed here last night but didn’t quite trigger an entry today. I’m looking at the same setup here, which is a single-day breakout play if price can clear $105.75 to make a new high.
BX is hugging rising support here after recently failing at resistance. A turn down through the trend line at $31.10 could easily trigger more selling, so I like this for a single-day play on the short side.
STX is hugging a small rising trend line here and a break below $49.10 looks likely to trigger more selling pressure as the downtrend continues. I like it for a single-day play on the short side if that break occurs, and there’s room for a quick retreat toward the low $47 range where next support lies.
New Swing Trade Candidates:
No additional swing setups added tonight, I’m watching the pair of candidates which still look good but have not yet triggered.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
