Good evening StockBandits!
Pre-weekend hype centered around a Cyprus bailout ahead of the deadline, and on Sunday evening here in the U.S. we saw the futures express relief that a deal had been reached. And even though the upside was contained, the market was able to hold onto the majority of the overnight gains by the time the opening bell came around. The resulting opening gap was met with some additional buying in the first half hour of the session, taking the NAZ, DJIA and S&P 500 each to new 52-week highs. However, price was rejected after attaining new highs as market participants moved to lock in gains rather aggressively, taking the indexes into negative territory by the 75-minute mark. A low was reached shortly after lunch on the east coast, and from there we saw a gradual lift back up. All in all, it was a choppy day with no lasting moves in either direction.
Tonight traders are wondering if the market has finally become tired. To see new highs get met with some selling isn’t in itself concerning, but to see a breakout attempt immediately fail on the heels of nearly 2 weeks of high-level basing action is certainly something to take notice of. Generally, strength out of bases finds follow through, but today was certainly an exception. We’re still inside the high-level base as of tonight, so we’ll see if the bulls can make something noteworthy happen in the 3 sessions remaining in this holiday-shortened week of trading.
Let’s get to the charts, and tonight there are no new swing candidates for me. There are still a few on the list from previous reports which haven’t yet triggered, but I see nothing new setting up for listing tonight. Instead, I’m going to review a few more example charts than usual as there were several which caught my eye.
NAZ – The NAZ pushed past 3260 resistance today, but only made it about 3 points higher before supply hit the tape. That sent price back inside the channel pattern which has been intact for 3 weeks now. This breakout failure after basing isn’t what the bulls had in mind, so it will be an important next few days for them as the end of the quarter draws near.
SP500 – The S&P couldn’t hold above 1563 today after pushing past it, and that gave way to almost a 1% pullback from the day’s high to the closing level. For now, it’s caught in the range between 1530 and 1564, so there’s room to flutter around without doing anything meaningful.
RUT – The RUT tested the highs today but then backed off about 8 points, leaving it back in the range for now. This is still overall bullish action, but the failure to rally on positive news has some bulls scratching their heads tonight. Is that an indication that fatigue has finally arrived, or simply a single-day fluke? We’ll find out soon enough.
DJIA – The DJIA had been basing nicely and then broke out today, only to get rejected and fall right back into the channel. That didn’t impress anyone despite the late-day lift from the low. This index could be subject to more selling if it undercuts the 14380 area of short-term support.
Notable Names:
V is just now starting to exit the trading range which has held it captive since January. Today’s turn higher was decisive, although the projection out of this pattern brings with it some limited upside. For that reason, this one may be better for a momentum play here than a swing.
UNP is pulling back here quietly to test rising support after having met its projected move out of the trading range which began late last summer. Should price prove able to stabilize in the coming days, this one may set up a breakout play in the days to come as it approaches the recent high. For now it’s resting, but one to keep on the radar.
ROK is starting to roll over very quietly in the past few weeks after reaching new highs and then stalling out. This one may be slowly changing directions, although an acceleration will sometimes follow these large rounded tops. The stock had rallied from the high $60’s last fall to the low $90’s, so a rest and some profit-taking would come as no surprise. I don’t see a play here yet, but will be watching bounces going forward to see if they stall out and potentially create lower highs. That scenario would likely make for better shorting in a stock like this if it is in fact changing directions.
HP failed a breakout two weeks ago and has shown some downside follow through since the reversal. It’s now trying to carve out some short-term support, although right now this is a very small base to initiate a swing trade from. If it can churn in this area a bit longer, then I may consider it for a play on the short side given the decisive move lower and the heavy volume which has accompanied it.
BA is trying to base here after an impressive breakout move a few weeks ago when it cleared the $78 area. More churning action in this area would help to better define this base as a channel or a flag or a pennant, so I’m keeping it on the radar due to the recent strength this one has shown and the likelihood of some follow through once this rest phase is completed.
JBHT broke out today and then promptly failed, stopping me out for a quick 2.8% loss. The loss itself was contained, but these headfake moves are never fun. I’m often asked how to avoid them, but the fact of the matter is that regardless of your trading timeframe or style, they will happen and simply are part of the process of trading. This is why I keep stops in place though, as I want to be out once price has failed the pattern and therefore have no desire to stick around and fight it. There are too many other opportunities to seek out than to battle a stock that’s not behaving as expected.
EBAY was listed here last night and gave a nice decisive move lower today as it undercut rising support. This type of thrust in price along with a big surge in volume is the type of move I like to see. It doesn’t guarantee anything going forward, but it does show me that at least here in the early going there’s some urgency on the part of sellers. I also like how the 3 previous days of upside were erased with today’s decline. We’ll now see if it can show follow through toward the targets.
New Swing Trade Candidates:
No new plays tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
