Good evening StockBandits!
The highs of the day were set in the opening half hour for each of the indexes today, and from there stocks simply churned. Traders seemed to be waiting for a new catalyst now that new all-time highs have been set for the DJIA, but nothing ever surfaced to prompt lasting momentum on the heels of yesterday’s breakouts. Instead, the net changes were minor following a very choppy session.
Volume remains light, and it may be that way for a bit longer. We have a jobs report on Friday which could spark a gap and perhaps some broader participation, but spring break is coming and the rally from the late-February pullback is starting to take on the look of fatigue. That doesn’t necessarily mean a lasting top is being put in, as currently there’s still no indication to suggest that’s taking place, but it does warrant greater caution on the long side until some basing action comes along.
I continue to find it of interest that the small-cap RUT has been lifting but hasn’t broken out with the other indexes. It is extremely close to the 932 high it set a few weeks ago, but it is notable that the index which led the way up is now lagging. To me that points to a smaller appetite for risk at this stage of the rally. Additionally, as I noted here last night there are a number of bearish charts for the indexes to be at their highs. I don’t recall a time when my watch lists were so evenly split in the midst of such a strong market trend.
Rather than predicting a turning point or trying to get cute, I’ve tightened some stops tonight in order to reduce open risk on stocks which have either stalled out or are simply not seeing their advances confirmed by volume. Should that result in raised cash on dips, I won’t hesitate to re-deploy it once higher-quality setups are seen. Currently, I’m hedged with some longs and some shorts, and my style is such that if and when the market gathers greater momentum it will naturally weed out the incorrect side. That should either put me net long on the next leg of a rally or net short should a pullback kick in. Tonight there are great number of messy charts out there which simply look to need more time. For that reason, I’m sticking with my current exposure heading into Thursday’s session rather than adding anything new (which would feel forced at this point with the lack of mature setups available tonight).
Be sure to submit your stocks for review today or tomorrow morning to ensure they make it to the list for this week’s Charts on Demand video. I always enjoy the chance to add some of your stocks to my own watchlist, and hopefully add some insight when it comes to the price action.
Let’s get to the charts.
NAZ – The NAZ cleared Tuesday’s high today but ultimately gave back the gains to finish down incrementally. This index is looking a bit tired with its inability to hold the 3196 breakout a few weeks ago and now its reluctance to build on the current breakout. Any additional selling would bring the unfilled gap from Monday’s close at 3182 into view as a first downside target.
SP500 – The S&P finished higher by less than 2 points today and ended up right in the middle of its narrow 7-point intraday trading range. This index looks due some rest after this nice rally off 1485 just last week, particularly without volume confirming this breakout.
RUT – The RUT is at the top end of its range but even after 7 straight gains it hasn’t cleared 932 resistance. There’s a small gap to Monday’s close at 916 which this index may gravitate toward if profit-taking kicks in, with next support at 894 down at the low end of the range. This index remains in a big-picture uptrend, but continues to churn in the near term as it constructs this 40-point base.
DJIA – The DJIA found a little follow through today but saw a narrow-range bar and more light volume after going 6 of 7. A pause or a pullback would actually benefit the bulls, but with Main Street enthusiasm as it stands, it’s going to be an interesting next few days as we see if this breakout can stick.
Notable Names:
MDP had been on my list for a potential buy above this falling wedge pattern, but tonight I removed it due to this breakdown in price. This turn lower negates the pattern, so I’ll give it a bit more time before considering a play here. It’s important to note that I always wait for price to clear the trigger price before entering, as that serves as confirmation that the stock is on the move. Premature entries prove costly, and this is an example of why that is the case.
LOW is showing a few bearish characteristics after a lengthy uptrend here. First was the failed breakout a few weeks ago, followed by the uptrend line break on heavy volume. Since then, price has lifted 7 straight sessions with declining volume in each, which sets up a very realistic chance for a lower high here. Paying attention to the price action in recent weeks can often yield several clues.
NFLX is building a high base here by holding the $175 area as support when just a few weeks ago it was short-term resistance. Although this stock has made a monster move from the low-$50’s back in September, it still may not be done trending higher if this triangle gets resolved to the upside. However, a turn lower could bring a swift pullback by way of profit-taking and shorts piling in, so this is a setup with a potentially emotional outcome to say the least.
TWX is still channeling higher here and on numerous occasions it has respected the parallel trend lines. Today it gave another example of why it’s often wise to lighten up into resistance as price attempted to penetrate the upper trend line only to finish back inside the channel. Trend lines mark the pace of a trend, and in this case they continue to keep dips and rips in check.
New Swing Trade Candidates:
None tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
