Good evening StockBandits!
In the sports world, true domination takes place when one team simply can’t seem to beat the other. It’s not necessarily about a blowout win, because quite honestly anyone can have an off night and often times after that happens the favor is returned as the big winner lets up and the (former) big loser gets determined enough to even things up. But true domination…it’s lopsided. It’s all wins for one side, and all losses for the other. Like a wrestling match between me and my 5 year-old, I like to sometimes let him think he can get me but I’m still just bigger than he is.
That’s about how this market has been shaping up between bulls and bears since New Year’s. The bulls scored a couple of big wins early, but the bears have had literally nothing to hang their hopes on. It’s been win after win for the bulls, not necessarily in an impressive fashion, just a bunch of smaller but incredibly consistent gains. As a result, the market keeps inching higher without relent, and the bears have quietly slipped away until something changes. Why wouldn’t they? They’ll at some point have their time, but it’s literally an uphill battle right now. For the bears, it’s a case of “the beatings will continue until morale improves.”
To call this rally a one-way street isn’t necessarily a bad thing, as it has afforded us many nice trades on the long side in recent weeks. Perhaps the strength continues to favor both open positions and those which surface going forward. But even if it does not, the important thing to remember is that our job as traders is to put our capital into the best opportunities and keep managing the risk. When things seem to be on cruise control in our direction, we keep ringing the register as targets get hit and keep tightening stops accordingly to keep the downside protected.
At this stage in the rally, we’ve carried a long way and perhaps more importantly, the duration of the lift seems to be getting a bit long in the tooth. But rather than simply cash out and wait for a correction, my plan is to keep assessing the risk via the charts. By noting short-term levels of support, it’s far easier to stick with a trend in case it persists than to arbitrarily declare the end of a run. The fact is that I don’t know how long this rally will last, I simply need to keep participating in good opportunities as they surface, and lately there have been plenty of them. Stick and move.
Let’s get to the charts.
NAZ – The NAZ pushed higher today to create a little bit of separation between current prices and the 3196 area which has been overhead since last fall. However, the volume on this breakout so far is suspect despite the finish at highs. This index has had plenty of rest lately so it now needs to produce some follow through to add validity to this breakout.
SP500 – The S&P is working its way back toward the all-time high of 1576 from 2007.
RUT – The RUT just keeps impressing by setting new all-time highs almost daily. Today it did so again and finished at its best level of the day, suggesting buyers ran out of time before they ran out of cash. In case of a pullback, 912 is the level to watch.
DJIA – The DJIA got past 14020 today on a closing basis and now the bulls have a great shot at testing the all-time high of 14198.
Notable Names:
FFIV is turning up within its channel here after a pullback to test rising support (which also filled most of the gap from last month). This is positive price action and now there’s room to rally toward upper resistance, but volume on this bounce isn’t yet convincing.
NEM is approaching major support here but just sold off 5% in 4 sessions. It could stand to rest before attempting to break down, although it may simply be a matter of time given the lower highs in recent months.
PBF is a very clean setup which I’d ordinarily look to take for a swing, but earnings are due out on Thursday morning, making this much more of a momentum setup than a swing.
NDAQ is working on a pennant here after a very steady rally. This narrowing price action would help to set up a play with less distance between a technical entry and rising support, hence less theoretical risk. I’m going to keep it on watch for another day or two and see if it can do so.
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.
RCL has pulled back within its uptrend channel and is holding support from January. A turn up from here sets up a favorable risk/reward for a swing, so I’ll get long if it can clear $35.90 in expectation of a lift back toward the upper end of this channel. A breakdown from here would negate this pattern and would warrant removal.
MGA has found buyers in every minor dip of late and now volume is picking up as price starts to pressure resistance. A breakout from this ascending triangle would take place through $54.60, so that will be my pivot for a buy. I’ll of course wait for a break before entering, as that will be my indication that price is back on the move.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
A couple of swing updates are worth noting tonight. I removed LULU as it did not ever trigger an entry and has negated the pattern, and EBAY has been removed due to a lack of strength despite the NAZ turning higher. I am aggressively tightening my stop for BIG, as earnings are due out next week but I could not find a consensus as to the exact date and time (saw both 25th & 28th listed), so I plan to be out by Friday. CLR is also set to report next week so I’ve tightened my stop again and will be out of the position entirely no later than Wednesday of next week. I’ve updated stops on some others as well for smart management (see additional notes on the spreadsheet below), and am glad to address any specifics or questions via the comments beneath this post. Being positioned long during this rally has been nice, but I plan to keep adjusting as necessary to reduce risk and keep my capital put to the best use.
Trade Like A Bandit!
Jeff
