Good evening StockBandits!
The trap was set last week following an extended rally and then a hard Wednesday selloff. We saw a rebound on Thursday and attempt on Friday to follow through to the upside, but 3 of the 4 indexes I watch reversed lower on the final session of the week. The bulls either got trapped with the snapback rally on Thursday, or the bears got trapped with the Wednesday decline. Just which side got trapped, we’ll have to wait and see! One thing’s for sure, it’s going to lead to some real disappointment for one of them and likely pretty soon since we’re still hovering near some key levels on the daily charts.
Even the past few days of relatively limited overall movement has helped my watchlists to populate. A little bit of basing action goes a long way, particularly after a big move in price like we saw off the early February lows. That has translated into the creation of many more flags and pennants, although quite a few of them still need some additional work before their patterns can be considered mature.
The stage is set for another pivotal week ahead, either we fail at these key areas or we see upside follow through. Earnings season is largely behind us, removing a focus on individual names from day to day and returning it to the overall market. I’m viewing that as a positive and am looking forward to having more chances to commit to multi-day swing trades even though there have been some very nice cash-flow trades as single-day movers. I’ll continue to take some of those as well, but my favorite times are when I can have capital at work across both timeframes.
Let’s get to the charts.
NAZ – The NAZ made new multi-year highs again last week, but was joined by no other index in that accomplishment. It’s churning near the highs here and just a short distance above the breakout zone of 4246, leaving it very little breathing room to avoid a failure. Truth be told, some profit-taking would be healthy after a move of this magnitude.
SP500 – The S&P continued to respect 1850 last week from below, making that the all-important level for this index. There’s a bit of a cup and handle pattern developing with the past few days of basing action to start forming the handle, and it’s about 113 points high. That could lead to a powerful breakout, but first the bulls have to set it in motion. Otherwise, a retracement of a fair amount of the February lift becomes more likely.
RUT – The RUT returned to test 1167 last week but couldn’t reclaim it on a closing basis. It has also in the past few days respected 1147, putting it in the familiar trading range it spent time bound by in December and January. My view is that a push north of 1167 makes the high at 1182 the next stop, whereas a drop below 1147 and we see more profit-taking kick in.
DJIA – The DJIA knocked on the door of 16174 all last week but never could close above it. There’s ample room for a retreat to lower prices, but we’d need to see a multi-day low (break of 16000) to set that in motion. For now, prices are hovering at a key area and digesting the recent ramp.
Notable Names:
YRCW is facing another trend line here and I like it for a single-day play if it can clear $22.50. A swing stop is just too wide, but this stock can be a mover and that bring some opportunity I don’t want to miss.
WAG is sitting in a powerful bull pennant pattern here and could get going again soon. A new high at $67.30 puts it back on the move, and I like it best here for a single-day play. Should the pattern tighten further, I would consider a swing. I like how volume has tapered off during the rest phase of the pattern, which allows for volume expansion on any turn higher.
SALE is sitting just shy of resistance and a breakout through $43.70 looks good for a single-day play. This stock has been gap-prone in recent weeks, so I’m not interested in an overnight and will just look to participate in the initial breakout move if it happens on Monday.
MELI is still trending lower and trying to break down here. A break below $90.50 looks good for a play on the short side. Here again, a swing stop would be too wide, but there could be some nice initial selling on the break so I’ll take it for a single-day play.
XONE is sitting in a very clean rising wedge here and could break down any day. A swing stop is still a bit too wide for my taste, so if it breaks $45.60 on Monday I’ll just take it for a single-day play on the short side. A little more time inside the wedge would allow the pattern to tighten and reduce the distance from a technical entry to a technical stop, in which case I could then set up a swing. For Monday, it’s a single-day play for me upon a break of rising support.
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.
YELP is sitting in a tight symmetrical triangle pattern here and the overall trend has been up. I like the risk/reward here for a swing on the long side, but only if price can clear the upper trend line at $93.40. I’ll keep a stop beneath the lower trend line in case of a reversal and will be looking for an eventual move equivalent to the height of the triangle as a final target.
FEYE has been a fickle stock but I like the risk/reward here for a swing on the long side. I’ll get long if price clears the trend line at $74 with a stop just beneath last week’s low in case of a reversal. I’ll look for volume to pick up on any advance in price and will be looking for a new high if this momentum stock gets back on the move.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
