Good evening StockBandits!
It has been said that the most bullish thing the market can do is go up, and that’s what we’ve been seeing a lot of lately. Despite concerns that we might become short-term stretched, the bulls continue to put cash to work on every little dip in price. Today we saw a soft open get bought, and once again by the end of the day the indexes were modestly higher as they finished the day at their best levels of the session.
This market has momentum – not the sort where we’re seeing runaway intraday moves, but rather the type where he indexes just continue to move higher without pulling back or resting. That’s keeping the pressure on the bears for now, and underinvested bulls have a sense of panic as well with the feeling that perhaps stocks may never retreat again.
Of course, that’s just an emotion and far from reality. As traders, it’s important to be aware of the increasing likelihood of a pullback, but it’s not necessary to start playing for one by trying to fade this tape. The trend is up, it’s just a matter of respecting that and becoming a bit more cautious on the long side when the moves become extended. Anyone who has traded for even a little while understands that just about the time the market starts to become extremely predictable, there’s just something that tends to shake things up a bit. Right now with the market advancing on a daily basis, it’s starting to feel a little bit routine and therefore the element of surprise should not be discounted.
I’m not seeing a lot new tonight in the way of new plays, so again I’m not looking to force anything. I’ll continue to take the best plays, whether long or short, and expect that it will keep me positioned properly.
Let’s get to the charts.
NAZ – The NAZ rallied again today in modest but steady fashion despite continued light upside volume. This index keeps creating more space between current prices and last week’s gap, which could serve it well on a pullback once it arrives.
SP500 – The S&P kept its streak intact today in spite of spring break-like volume, working toward 1576. This blue chip index seems intent on testing that area, although with a run like this since 1485 two weeks ago and volume being so light, it’s sure difficult to add to the long side until we get some profit-taking.
RUT – The RUT put up its 10th straight advance today with a tiny 0.01 gain. That keeps the streak alive though, and this index continues to make new all-time highs by the day since clearing 932 last week.
DJIA – The DJIA keeps lifting in modest amounts each day as it gets closer to 14500, but volume is starting to tell a little different story in terms of how much gas may be left in the tank for this short-term rally. It would be ideal for bulls for some profit-taking to kick in, as that would offer lower prices for bears to cover (buy) and bulls to allocate more cash (buy).
Notable Names:
TOL has been working slightly lower for the past several weeks and looks to be carving out another lower high. The homebuilders have been incredibly strong since the 4th quarter of 2011, and these corrections may lead to much higher prices eventually, but for now one wonders if they’re starting to lead in a different direction.
Why I Use TC2000LNKD remains very strong here and after resting for the past week it now has a new pivot for momentum players. After a big rally like this one has made, it could certainly continue, but I’d prefer to see a larger base build before considering a swing here.
CAM is sitting just beneath a big pivot for a breakout but the trouble here is that there’s no nearby stop loss on the chart. The uptrend line is simply too far away, so this is one where momentum players either take it for the initial breakout or swing traders like me wait and hope a tighter pattern can develop in the days to come.
KKD has made a major move higher in recent months and now sits in a small pennant pattern which could also bring more buyers into the picture on a breakout. The issue for a swing timeframe is that the smaller the pattern tends to be, the shorter the duration of a move out of that base. I’ll wait even if the “Hot Now” sign is on.
HPQ is holding above a major level since clearing it last week. More time above the $20.50 zone would help the rally continue even though it’s already been an impressive one since November.
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.
SODA looks to be carving out another lower high here and it has just bounced on very light (and diminishing) volume. The price up / volume down scenario paints a bearish picture as well, so I’m looking to short this stock if it breaks the rising trend line at $49 to begin another leg lower. My protective buy stop will be just above the bounce high and I’ll be looking initially for a test of the recent low.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
