Good evening StockBandits!
Following the break of uptrend lines the previous week, stocks churned last week as traders mulled over whether or not to commit more capital or raise cash. Scheduled news included testimony from Bernanke and the much-anticipated sequestration, yet neither were able to produce lasting momentum in stocks. Beginning of the month bullishness also didn’t translate into much upside on Friday. Instead, the averages finished the week mixed and little-changed.
The RUT, which has led the way from the November lows with a 21% jump, has pulled back from its recent high and become a bit more lively than the gradual near-daily advances we had been seeing. To see the more speculative small-caps show some indecision is a pretty good measure of just how committed the bulls are at this point. It seems nobody’s excited about the prospects of a deeper pullback, yet few are aggressively buying this dip just yet as evident in the lighter upside volume of the past few days.
Meanwhile, the DJIA is becoming a bit more volatile with a megaphone pattern on its daily chart showing mostly lateral movement in an expanding fashion. The short-term incremental higher highs and lower lows are indicative of the need for a catalyst or some leadership at this point. The S&P 500 and NAZ are both churning in the areas of their broken uptrend lines, thus far unable to reclaim those levels in a convincing fashion.
While we await a resolution to this indecision, it’s important to consider plays on both sides of the market as they come along. Currently that leaves me hedged with some longs and shorts, and I expect that once a lasting direction is chosen by this market, it will weed out the necessary side of that equation. In the meantime, it gives me the opportunity to potentially book gains in both directions. I’m also still staying selective with new plays as the added recent volatility and lack of follow through is leaving many charts with sloppy looks to them. The key during times like this is to stay patient and objective, knowing that better opportunities will surface soon.
Let’s get to the charts.
NAZ – The NAZ was able to lift from its pullback early in the week but still managed to only tack on 8 points for the week. The volume tied to the bounce days of late is also extremely light by comparison to the declines, which makes this rebound look pretty shaky to say the least. The high is in at 3213 for now, but there’s some freedom of movement down to 3105 which is short-term support. That leaves this index range-bound until further notice.
SP500 – The S&P also remains range-bound here since tagging 1530 and then pulling back to 1485. Those are the two levels to watch until broken, and here again the heavier volume has been consistently on the downside of late. That’s not encouraging to the bulls, and neither are the wide-ranging bars of late which point to some restlessness. Nonetheless, the highs are less than 1% away, and if cleared we could see this blue chip index head toward the all-time high of 1576.
RUT – The RUT remains in a defensive posture here after breaking the downtrend line and remaining beneath that 917 level. The 4-day bounce since Tuesday after the successful test of 894 may be stalling out here, in which case some heavier selling could kick in. Otherwise, a turn back up toward the highs could simply leave 894 as another higher low within this trend.
DJIA – The DJIA is seeing increased volatility of late with no real progress. That has resulted in this megaphone pattern. The all-time high is not far away (14198), but the breakout attempts through 14020 lately have proven unable to gather momentum thus far.
Notable Names:
AAPL had been stabilizing and moving laterally while the downtrend line was beginning to catch up. That had bulls holding out hope for a potential trend change, but on Friday this mega-cap broke $435 support to continue the downtrend. I’ve seen many stocks trend like this in both directions, and they always seem to carry farther than one would think is possible. Just a few months ago this bulletproof stock had cleared $700 and looked destined for quadruple digits, but bounces have since been repeatedly sold and that’s not something to argue with. Attempting to put a book value or bargain hunt is of no use – trust the trend until it ends, and right now that’s down, meaning there is zero technical reason here to be long.
BBY perked up on Friday after posting solid earnings, and the stock held up even after news surfaced that there are no buyout talks as have been rumored. Higher lows are in place for this recovering retailer, although key resistance is approaching and may be a headwind for this stock once reached.
GES is pulling back quietly to uptrend support here but has a little room left before a true test would be underway. This stock has gradually been in recovery mode in recent months and this dip thus far does not appear to be a negative change of character. For this reason, it may be a viable trade in the days ahead as a buy from support, although I’d like to see price and the trend line get closer first to see if it will hold.
CCL is testing former (broken) support from below here after a 4-day bounce on light volume. Post-Triumph, this stock remains under pressure and this $36 area may continue to hold given the prevailing mood toward this stock.
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.
ITG is basing here just beneath highs after a very nice multi-week advance. This is a healthy digestion phase and I’m setting up a trade on the long side in case it begins another leg up. I’ll get long through $12.35 as the small descending trend line gets cleared, and will use short-term support as my initial stop. This one has room to run toward an unfilled gap and a resistance zone from July 2011, which is where I’ll set my targets.
STX has broken support and held below it despite a multi-day bounce attempt. The rebound looks to be stalling out here, so I’m interested in getting short upon a turn lower from here. A move below intraday support Friday will be my trigger to short this stock at $32.10, and I’ll use the $33.10 level as my initial stop. This stock could quite easily continue lower from here to keep the intermediate-term downtrend intact, so I’ll be setting a pair of targets at levels from December.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
