Good evening StockBandits!
Afternoon weakness has quickly become the new routine, and today we saw it again for the fourth straight session. Despite the indexes being able to finish slightly positive across the board, each of them ended well off their session highs. This crawl-across-the-finish-line habit is starting to sew some seeds of doubt. If the old adage is true that amateurs open the market and professionals close it, then we’ve seen some institutional profit-taking kick in over the past few sessions.
Interestingly, the bulls still retain the short-term edge and are still certainly capable of producing upside continuation – including breakouts (which actually hold) for the RUT and S&P 500. They’ve not yet done so, and this really seems to be a battle taking place near these recovery highs as the bears cling to hopes of a double top.
Anyone involved in the markets understands the human nature of attempting to predict what happens next. That isn’t to say we all aim to do so, but simply that at times the thought comes to mind. I never logically want to call the next move because I realize it’s not necessary to make money trading. Even now, there will be good trades on both the long side and the short side of the market regardless of which direction the indexes head.
That said, I do believe it’s wise to assess current conditions on an ongoing basis to determine the path of least resistance. Having seen huge rallies over the past 3 weeks and with major resistance zones still unable to be put in the rearview mirror, there’s definitely reason to consider a pullback here. Prices are struggling to continue higher, and traders sense a second chance to lighten up near all-time highs in the case of the RUT and S&P 500. Toss into the mix the fact that profit-taking is a healthy part of trends, and there’s even reason to root for a dip here.
The market doesn’t frequently cater to the masses, but this is one of those times when underinvested bulls would love lower prices to reload, and bears would love lower prices to exit short positions. The only problem is, we’ve not yet seen the start of a decline so we absolutely must keep an open mind. There’s no rule against new highs should the selling fail to intensify.
Let’s get to the charts.
NAZ – The NAZ reached 4316 today, a level not seen since 2000, but once again backed off its session high. At best this is consolidation and digestion of the 3-week rally. At worst this is a subtle shift into a pullback. I’m watching the low of this week at 4272 as the line in the sand for any meaningful selling.
SP500 – The S&P is either coiling here before a breakout or has already (thrice) attempted to break out and can’t get it done. Any downside break of 1836 (this week’s low) would likely trigger some profit-taking, whereas any solid close above 1850 opens the door for more upside.
RUT – The RUT is up huge from the February low, just shy of 10%. It is by any measure extended here, which may be why today’s breakout attempt couldn’t stick. Nonetheless, the bulls just need a close above 1182 to make it official and so far only some afternoon weakness poses a threat.
DJIA – The DJIA keeps flirting with 16174 but can’t seem to get free of it in either direction. This index is still a long way from highs and has just seen a huge lift from the February low, making this an important level both bulls and bears are fighting for. A failure and we see some good selling, and a solid close beyond it and a test of the highs becomes a possibility.
Notable Names:
BAC is another bank stock that’s struggling here. These are not helping the S&P with their relative weakness, so they remain an important tell for that index.
EBAY is reaching the upper end of its range here but is getting a bit short-term extended at the same time. The best scenario here would be a pause before a breakout attempt is made.
FEYE hit target 2 today, and it was a fun, quick ride. It may not be done, but it achieved the price projection based on the pattern, and it just made a 3-day move. We’ve seen similar 3-day moves in this stock, so I’m very pleased with the trade even if it does happen to continue higher without me. I’m planning a post discussing these more volatile stocks which I’ll likely put up on Friday, so watch for that.
LULU is at short-term resistance here but I’m only interested in a single-day play if price breaks through $52.90. That would allow it some freedom to move further into the unfilled January gap. The past week and change has been a nice way to digest the upside breakout from the falling wedge we saw a few weeks ago.
HLF is at rising support after having stalled out a few weeks ago on its bounce attempt. A downside break of $66 looks good for a single-day play on the short side to me, but this stock is so news-driven that I am just not interested in an overnight position for a swing.
FDX is at rising support here and a downside break of $131.75 could bring a quick test of the February low near $128. I like it for a single-day play if it breaks the trend line.
AMP has stalled out for the past few weeks an now faces rising support. A downside break of $106.20 would put price through the trend line and could trigger some selling. The risk/reward for a swing isn’t appealing enough here yet, so I’ll take it for a single-day play instead.
New Swing Trade Candidates:
No new swing candidates tonight, mixed market signals and bases need more work. My watchlist has grown but patterns need to tighten to increase my interest.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
