Good evening StockBandits!
Stocks failed from higher prices today to break the streak of advances as the buyers finally went on strike. Following a slightly soft open, the market rallied steadily for the opening hour to fill the gap and move into positive territory, but that marked the high of the day. From there, we saw a period of quiet congestion before a stumble and some failed bounces. In the final two hours though, the selling pressure never relented and stocks went out at their lows of the day.
Today’s decline essentially erased the last 1-2 days of upside (depending upon the index in question), so it’s not as if today were technically damaging. The NAZ did fail its breakout to fall back beneath 4246, while the S&P 500 once again turned away from a good chance to clear the high of 1850. Now is when we should be able to gather some useful information as to the true health of this market. The rebound from the low has been incredibly steep and happened on light volume, which points to a high degree of short-covering. Now that prices are in pullback mode, we should get a better feel for the interest of buyers into weakness.
My watchlist took on a bearish bias tonight as many recent bullish charts look to be entering a pullback phase or rest phase. That’s not to say that the market rolls right over and dies here, but simply that the short-term directional bias for me is to the downside as we see some much-needed, healthy profit-taking kick in following the straight-up ramp from the early-February low.
** Hit reply to this email with any tickers you’d like to see in tomorrow’s Charts on Demand video, and I’ll add them to the list.
Let’s get to the charts.
NAZ – The NAZ saw a little heavier volume today but it remained below average as the breakout through 4246 failed. Following the massive 8 1/2 day rally, there’s still ample room for profit-taking. Should we happen to see some downside follow through, 4177 and 4148 are the next levels I’ll be watching.
SP500 – The S&P again respected 1850 today as it got near the all-time high and then reversed over 20 points. The weak finish and bearish engulfing bar today suggest we could easily see more downside. If so, 1823 and 1799 are the levels I’ll be watching.
RUT – The RUT painted a bearish engulfing bar today by making an incremental new recovery high and then reversing lower by almost 15 points to finish at the lows of the day. It’s back to the 1147 area, so we’ll see if any respect is given to that level or if instead this much-needed pullback is just getting started.
DJIA – The DJIA danced around 16174 again today, pushing past it but still unable to close above it. The downside reversal has yet to show follow through, but certainly has the look of short-term exhaustion after a massive lift from 15340.
VIX – The VIX turned higher by over 11% today, and in the process looks to have carved out a higher low on the daily chart. This confirms the turn lower in the market, namely the S&P, and now this fear index has room to rally back to fill the unfilled gap to 17.23 from Feb. 6.
Notable Names:
SHLD finished lower on the session but well off the session low, if that makes sense. The 3-day pullback saw a 2% lift from $40.01 today, and now price is facing a short-term descending trend line. I like this setup for a quick rally if price can clear $41.50. It has room back to $44 where it recently peaked, making this a single-day play for me.
MNST is sitting in an inverted ‘h’ pattern here as price faces a potential breakout. I like it for a single-day play on the long side if it can clear $73.40 to participate in the initial push higher. Volume is picking up, so it may be getting ready to go. The last new high only lasted about a day, which is all I’m looking for here.
MA has a series of lower highs in recent weeks and now has potential to carve out another. I like this one for a play on the short side if price undercuts $76.40. The risk/reward for a swing (stop above the bounce high, target at recent low) is only slightly better than 2/1, so I’ll opt for a single-day play here if it happens to break down.
STX is resting on rising support here and a break below $48.80 sets up a play on the short side. There’s some key support in the $47 to $47.50 area from Oct/Nov last year, so I’m only looking for a retreat to that area and therefore am only looking to take this for a single-day play.
FDX is still in correction mode and the current 2 1/2 week bounce may be coming to an end. I like this one for a single-day play on the short side if it breaks $131, as there’s room for a quick test of the February low near $128.
JKS is hugging rising support and a break below $30.10 could spark some profit-taking after this big 2 1/2 week bounce. I like this one for a single-day play on the short side, as a swing stop would belong above $32.10, nearly 7% away, which is too wide for my preference.
New Swing Trade Candidates:
No new swing candidates tonight, sticking with existing positions.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
