Good evening StockBandits!
Oversold conditions at last night’s close left bargain-hunters and bears looking to buy, and a gap higher this morning set the tone for the session as a snapback rally ensued. It only lasted about half the session before things cooled off, with stocks churning and drifting slightly back down for the final 3 hours of the day. The end result was a very unconvincing rally due to reduced upside volume, an inside day, and only a very partial recovery of Monday’s decline.
That isn’t to say that the bounce will be unable to continue, because it may. Rather, it simply has that same dead-cat appearance like we saw last Tuesday. The averages are still pretty oversold here, which is to say that they remain stretched on the downside. A single advance like we saw today does not negate that. However, stocks and indexes can remain oversold, so it’s not as if we can bank on more upside. The sellers are showing more aggression of late and they have the momentum, which deserves our respect.
Tonight there is still a lack of clean patterns with narrow risk associated with them. That equates to a lack of swing setups, although there are several single-day plays I’m eyeing for tomorrow’s session. Those have provided some very nice moves for me in recent weeks, and since they’re what’s available right now, I’ll take what the market has to offer and remain patient on the swing front after returning to cash today (details below).
Let’s get to the charts.
NAZ – The NAZ tested the same level it bounced from last week (4044), then slid about 13 points into the close. This is just a sign of respect for a short-term level. Overall, the correction remains in effect here, leaving 3966 as the next downside level to watch.
SP500 – The S&P reclaimed 1746 today, but the advance sure was visually disappointing for the bulls after Monday’s huge slide. This index remains vulnerable to further downside, and today’s inside day on diminishing volume doesn’t change that.
RUT – The RUT reclaimed 1099 today, but here again the bounce was so small compared to Monday’s decline that it’s just extremely difficult to trust. The weak finish on the day also lends credibility to the sellers still being in charge, even on a down day.
DJIA – The DJIA put up a dead-cat bounce today of just 72 points after a 326 point slide yesterday. Tonight it sits in no-man’s land with no nearby support or resistance to point out. The correction is still in effect, so it still has much to prove before it can be trusted for lasting upside.
VIX – The VIX continued its 18-month history of single-day closes above 20 when it slipped back beneath that threshold today. Fear is still elevated, so this market isn’t out of the woods by any stretch.
Notable Names:
APA just filled a gap from last August, making it one of many stocks which have reversed to fill old voids. It may not be done yet, but this is yet another example of a stock having changed direction without looking back, reminding us all to maintain stops.
ESI is still selling off here with today’s decline being the 10th consecutive decline. Be very careful trying to buy dips, as downside momentum often accelerates and produces this type of look. Waiting for support to be respected or for price to stabilize is always a better bet than simply placing bids arbitrarily into weakness.
HXL is one stock that met a former level today then reversed higher for a short-term bounce. The stock remains in a short-term downtrend, but extending levels or trendlines from former levels can prove beneficial.
YHOO is on my radar here but doesn’t quite look ready for a play. I like the bear flag it’s building, but would prefer to see the pattern tighten just a bit more before setting up a play. Also, price is not yet pressuring the lower trend line, which is something I like to see on bearish setups.
SUNE is turning back up after a dip and a push through the trend line at $14.25 gives the stock room to rally back toward the recent high near $15.20. I like this setup for a single-day play, but a swing stop would be too wide.
CRM is facing a possible breakout here any day now, but this base is very loose and therefore not a swing candidate for me. I do like it for a single-day play on the long side if price can clear $61.65 to make a new high, just to participate in the initial push.
CALD is set to report earnings Wednesday after the bell according to Yahoo! Finance, so this will only be a single-day play for me. I do like the setup here for a quick lift if price can clear $14.85 and push back toward the recent high for a test.
MGM is working on a bearish rising wedge here but could stand to tighten a bit. If price undercuts rising support at $23.60 on Wednesday, I’ll opt for a single-day play on the short side to participate in the initial breakdown.
ULTA is hugging rising support and could see a quick test of the low if it gets through. I like it for a single-day play on the short side if price breaks $83 with room to $80.50 for a test of the January low.
New Swing Trade Candidates:
No new swing candidates tonight, back to 100% cash waiting for new setups after ITT hit target 1 today then reached the adjusted stop to close out a nice quick winner.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
