Good evening StockBandits!
The weak finish on Friday gave the appearance of a tired market, but today it kicked off the new week with ample strength. Each of the averages posted solid gains, although they did see some late-day weakness. The two most notable events of the day were the NAZ reaching a new multi-year high, and the S&P 500 breaking out to a new all-time high above 1850 – only to close back below that highly important level. The peek-a-boo breakout stands as a failure for now, although it certainly wouldn’t take much additional strength from here to produce a close above 1850 and make it official.
It wasn’t much rest before another rally attempt, so it’s going to be a pivotal next few days for the market as we see whether the failure to achieve across-the-board breakouts is a bearish omen, or if instead the bulls can keep the pressure on and create new highs in the S&P, NAZ, and RUT. The big key for us as traders is to stay mindful of the fact that many individual names remain stretched here (along with the broad market), and that opportunities will surface on both sides of the tape if we stay attentive.
I saw a discussion today on the topic of whether today’s move was machine-generated or human-driven, and I just have to discuss it tonight. The difference, by the way, would be that the former is program/algo-driven, whereas the latter is emotion-driven. Regardless of which side of the argument you fall on, my 2 cents would be that it doesn’t matter which one is driving the move – what matters is that stocks are resuming their rally after a few choppy days of indecision last week (i.e.: a basing attempt).
If we’re basing decisions on charts, then price and volume are the important elements to consider. Emotion may surface periodically with decisive moves, but even if a move could be traced back to buy/sell programs, the moves are still real so long as prices are changing. If you’re short the market and we see a rally like today, it’s going to hurt! If you’re long and we see a rally like today, it’s going to be a lot of fun! Don’t get bogged down in the HFT vs. human emotions argument, because at the end of the day (and even in the middle), all that really matters is price.
Let’s get to the charts.
NAZ – The NAZ ended the day 18 points off its highs with a little bit of a rainbow look to the intraday chart. This is the second straight session with a weak-ish finish, but with prices at their best levels in almost 14 years, it’s hard to judge. Price is still rather extended here, so any profit-taking would actually be healthy.
SP500 – The S&P pushed past 1850 today after numerous attempts in the last 2 months, yet couldn’t hold it. This created a peek-a-boo breakout, a.k.a. breakout failure, for now. We’ll see if this failure represents the start of some meaningful profit-taking, or if instead it’s just a hiccup on the way to higher prices. The trend is up, but price is still extended here.
RUT – The RUT got within spitting distance of the 1182 high today, stopping just 2 points shy of it before backing off roughly 6 into the close. Many will jump to the double-top argument, but that’s a pretty rare pattern. Either way, some rest would be in order after this 9% lift, but we’ve yet to see it.
Notable Names:
GILD is facing a breakout here and I like it for a single-day play on the long side if price can clear $84.50. Given it’s a biotech, I’d prefer to just participate in the initial move higher and be out by the closing bell than to take it as an overnight swing.
WWWW has seen a number of gaps in recent weeks, so I’m reluctant to take it overnight as well. This is a nice clean bull pennant, however, so I am interested in a single-day play if it can break out at $37 on Tuesday.
SCTY recently cleared a descending trend line and now is facing a test of the January high. A breakout through $80.10 looks good for at least a quick pop so I’ll take it for a single-day play on Tuesday if it is able to clear that level. The overall trend is up, but a swing stop is just too far away.
WAG was listed here last night but did not trigger today. The same pattern is in play, so I’m going with the same setup for a single-day play on Tuesday: getting long if it clears $67.30. Here again, I’d like to see the pattern tighten before considering it for a swing, but on the plus side this pattern is maturing by the day – it just needs a little more to further reduce the distance from a technical buy to a technical stop loss.
P is hesitant to push higher here and has the look of a stalled-out stock at the top end of its range. A multi-day low could trigger some profit-taking, so I like this one for a single-day play on the short side if it breaks $36.80. I’m not expecting lasting downside, hence the reason this is not a swing.
XONE made no real progress today but with the overall market so strong, I’m not really surprised. I am willing to give it another shot on the short side on Tuesday because it did show some relative weakness today, so I’ll go for a single-day play upon a downside break of $45.40.
New Swing Trade Candidates:
No new swing candidates tonight, sticking with existing positions while waiting for additional high-quality setups to emerge.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
