Good evening StockBandits!
A flat open this morning quickly turned into a trend day to the downside as early weakness prompted more selling. A poor ISM number was fuel to the fire with stocks making immediate new lows on the news. From there, each successive bounce was sold with zero letup. About the only relief the bulls saw was some lateral price action in the final two hours. In the end, the DJIA dropped over 3 bills while the NAZ registered its first 100-point loss since November 2011. Fear spiked with the VIX easily clearing 20, then 21, highlighting the Street’s efforts to buy protective puts as stocks continued their slide.
There’s no question it’s suddenly ugly out there, and the bears are getting their day in the sun after an abrupt shift of character two weeks ago. Now, the bulls are on the defensive with no edge to speak of other than what is becoming an oversold situation. The proverbial rubber band can get stretched enough to produce a quick snapback rally, although with the persistent selling we’ve recently become accustomed to, bounces will likely in the near term at least be opportunities to remount shorts or lighten up on longs for those who are still trapped.
It was a phenomenal day in terms of trades with OII, TSL and DDD each producing excellent single-day plays after being listed here last night. I also triggered on ITT short as a swing, and have tightened my stop (see below) aggressively as per my game plan due to earnings which are quickly approaching.
There are only a handful of stocks holding up in this market while many have broken down hard. The stretched nature of the market tonight makes new trades extremely tricky, so I’ll be treading light tomorrow with only a few setups on my radar.
One last item is that some of you received multiple correction emails last night on the ISIS setup (which didn’t trigger anyway). For that I apologize! We had some server issues which caused that but which have since been corrected, so you should not see that occur again.
Let’s get to the charts.
NAZ – The NAZ had a bear flag look to it last night and today it confirmed that pattern with a new correction low. Today’s selloff was relentless and came on heavy volume, making an exclamation point for the bearish argument. Next support is quickly approaching here, now just 30 points away. It has been a fast 250pt slide off the high of less than 2 weeks ago.
SP500 – The S&P confirmed its bear flag pattern today with a hard break below 1775 before undercutting the November low of 1746 as well. Next levels to watch are 1729 (a prior high) and 1709.
RUT – The RUT gave up 3.2% today as it broke through 1123 and 1099. Next potential support is from November at 1079, but the buyers don’t seem the least bit interested in the small caps right now.
DJIA – The DJIA continues to hit the dirt here and today it broke 15703 support with emphasis, giving up 326 on the day. There is no nearby support, leaving only 14719 from last October as a potential level to watch. The problem for the bulls is that it’s still over 600 points away. We may need to see a capitulatory selloff and reversal for this index to finally stabilize.
VIX – The VIX punched through 20 and 21 today, confirming the broad market selloff as a signal of escalating fear. Historically this index has needed to get north of 30 or even 40 to mark a lasting market turning point, although in the last 18 months it has only reached the low 20’s before reversing.
Notable Names:
AAPL already reported earnings and actually posted gains on Friday and today to exhibit some relative strength. This isn’t a bullish setup by any means, but it’s acting like it may want to bounce and with the market stretched it could lead the way. Keep it on watch as a potential tell.
SBUX is getting stretched to the downside but may need to complete the gap fill from last summer before it’s finally ready to stabilize. Like many charts, it’s still bearish but too late for an entry.
COP is another stock with a big rollover look to it here. There’s zero reason to be bullish here, but chasing it on the short side doesn’t look any better. This is an example of why there are so few setups at the moment.
GOGO shows why momentum is so important to respect. Just a couple of months ago, it was running higher with velocity, but since December it has reversed lower and has even filled the breakaway gap from November. Keep stops in place at all times, because you never know when a stock will completely change directions without looking back.
GPRE is holding up well here but earnings are due out on Thursday. I like it for a single-day breakout play for Tuesday if it can clear $22.70 and make a new high.
YELP is set to report earnings on Wednesday but may still make a move tomorrow. A break of rising support at $73 looks good for a single-day play, but I will not be holding it overnight.
GTLS is at short-term support here and a breakdown at $81.50 looks good for a play on the short side. A swing stop would be several dollars higher (too wide for me), and if the overall market happens to bounce I just would prefer the tight intraday stop, which is why I like it just for a single-day play.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for better risk/reward scenarios in the charts.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
