Good evening StockBandits!
The market pulled back today without an attempt to rally at all as early weakness only accelerated the selling on news that the Fed may consider altering its QE program. It was a change of pace to see cash get raised in what has been a very steady climb. I’m not yet writing the obituary on this rally, but today looked to be a change of character worth noting.
Last night I noted the NAZ had made new highs on “suspect” volume, and today we saw some hard selling hit that index with an intraday trend to the downside. It was enough to completely fill the gap to 3165 I showed here 2 nights ago, and it came on heavy volume to confirm widespread participation in the selling.
Meanwhile, the RUT, which has led the way on this rally since November, sold off almost 2% on the day to bring it to within just a couple of points of the uptrend line and former resistance near 912 highlighted here last night. That’s the first line of defense for the bulls, although they seemed mysteriously absent today for the first time in a while. We’ve seen a couple of 1% declines in recent weeks for the small-cap index, but none have led to follow through. Tomorrow we’ll see if this time is different.
The last multi-day pullback we had in the market was in late December just prior to the fiscal cliff deal, and since then all we’ve had is upside and periods of rest. The idea of a pullback seems to spook many bulls, although there would be several positives to getting on. Not only are the bears and underinvested bulls hoping for a dip, but it could also help to prolong this rally. Healthy profit-taking is an important part of any rally, as it allows for higher lows to develop and new bases to form. So if we do see some additional selling, I’ll be viewing it as a positive to help create new opportunities.
Don’t forget to submit your stocks for review in this week’s Charts on Demand video where I comment on your charts. I’ll be recording it tomorrow, so be sure to send in the tickers you’re watching.
Let’s get to the charts.
NAZ – The NAZ has a few times lately attempted to clear 3196 and did so yesterday on light volume, only to give it right back today and then some on heavy volume. This filled the gap to 3165 and opens the door for continued selling, raising a warning flag to tighten stops in case the slope gets slippery.
SP500 – The S&P tested 1515 from below numerous times then cleared it and held that level as support for the past several sessions. Today it gave up that level with a finish at the low of the day to fall back inside its 1495-1515 channel.
RUT – The RUT gave up 2% today and now sits on the uptrend line going back to the November low. One day does not a trend make, but this was an abrupt change of direction with persistent weakness and a finish at the low of the day. I’ll be watching for possible follow through here and will be watching 894, 883, and 868 in the days ahead should we see more weakness.
DJIA – The DJIA repeatedly attempted to clear 14020 but still hasn’t gotten it done in a convincing fashion. Doing so would have paved the way for a quick test of the all-time high at 14198, but instead this index fell back inside its channel today. This is not indicative of short-term optimism, and if 13860 gets cracked we may finally see the first pullback since late-December.
Notable Names:
GS is narrowly holding inside its uptrend channel here but it wouldn’t take much to break it. Financials like this one have greatly helped the S&P, so if we see them start to soften it’s likely to bring lower index prices as well.
CRM is also holding narrowly inside its channel here and we may see a downside exit soon. It has already carved out a short-term lower high, and a breakdown from here could bring a quick test of the $162 zone it broke out from in December.
HD may be working on a double top here, although it would need to break the reaction low between the two peaks to confirm the pattern. Many traders see a test of resistance and jump to the conclusion of a double top, but few will wait for this necessary break as confirmation. This stock has trended higher for some 18 months, and therefore may finally be due a rest.
MON confirmed a double top today by breaking the reaction low, giving a nice example of what to look for. This is of course a negative change of character for the stock and it is now likely to get sold on bounces.
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.
COH is in a low-level channel as it hovers near long-term support. A breakdown from here would pave the way for a move toward the low $40’s, so I’ll be getting short if it breaks the $47.80 level.
FB has pulled back from its recent high and bounced on weak volume in the past few sessions. This has formed a wedge from which another round of selling could begin. I’ll be shorting this stock if it breaks $28.10 to confirm this pattern.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Last night I mentioned my aggressive tightening of stops for several swing trades, and tonight after being stopped out of a few and some other patterns being negated, my list looks different. I’ve already booked partial profits on a few of these and my stops have already been tightened for every remaining open position should this market pullback happen to continue.
Trade Like A Bandit!
Jeff
