Good evening StockBandits!
The bull turned 5 last week, which is quite a feat. The run off the March 2009 low has been nothing short of amazing. The S&P 500 has nearly tripled off its low of 666.79, the RUT and NAZ have each more than tripled from their lows of 342.59 and 1265.52, respectively, and the DJIA is worth over 2.5 times what it was at the low of 6469.95. Blame it on multiple rounds of QE from the Fed, blame an improved economy out of the financial collapse, or blame it on momentum that just doesn’t seem to quit. However you slice it, there’s no way around the fact that the market has RAMPED, and ramped big.
So on Friday with the release of the jobs report in the pre-market, the futures spiked higher and it looked like we were set for another big day in the averages. By the opening bell, however, the mood had shifted a bit and stocks started working their way lower right out of the gate. The strong open faded fast, and prices failed on good news, not bad.
Is the bull market ending? Is it dying of old age? It’s much too soon to jump to any conclusions like that. Instead of taking the conversation that direction, let’s stick with the short-term facts. We’re up huge from the low of just last month. Stocks don’t run forever in a straight line. Bulls have profits to protect. Many names are extended. A rest would do this market a world of good.
I could go on, but the bottom line is that some profit-taking is healthy and natural after any big move (in either direction), and at this stage both bulls and bears would benefit from that. With prices looking (and behaving) extended, adding long-sided exposure here just has less appeal. I’m hoping for a bit of a reset, but quite honestly, my desires don’t matter – only the charts do. With that, I’ll stay picky.
Let’s get to the charts.
NAZ – The NAZ saw back-to-back declines on Thursday and Friday, but the pullback so far has been very muted. The high at 4371 is the upside number to watch, whereas the unfilled gap below extends to 4277 should we happen to see more selling. This index is overcooked and needs to reset somehow.
SP500 – The S&P touched a new all-time high on Friday of 1883 and still has yet to cool off. The run of the past 5 weeks has been nothing short of impressive, and it’s positive to see the 1850 breakout holding, but the bulls would benefit from some profit-taking to establish a higher low and put more cash on the sidelines which could propel another advance.
RUT – The RUT has just painted 3 straight declines, but that’s not a very good description since essentially this index has just moved laterally during that time. Any and all rest is a welcomed sight after the run this index has made of over 12% off the February low. Any further selling could invite a gap fill to 1176, which is the downside number to watch.
DJIA – The DJIA is still grinding higher but has yet to break out and join the other indexes at multi-year or all-time highs. It has the least-stretched appearance of all the averages, but given that it’s the laggard, that’s no big surprise. 16588 is the high.
Notable Names:
PSX is basing just beneath resistance and is on my radar for a potential play in the coming days. I’d like to see upside volume improve or see price close a little stronger to suggest a breakout is imminent.
BAS is another stock that’s basing here, so I’m letting this bull pennant mature a bit more for now as price rests. A new high at $24.40 would start another leg up.
SYNA is sitting in a pretty tight triangle here but isn’t yet knocking on the door of a breakout. That could happen anytime, but I’m going to give it one more day and re-evaluate. For now, it’s on watch for me.
NBL is at a short-term descending trend line here and a break above $69.40 looks good for a single-day play on the long side. Since the low last month, the advances have been 1-2 day lifts so that’s all I’m looking for here if it gets going.
GOMO has been volatile and a swing stop would be rather wide here, so I’m only considering it for a single-day play. I like it for a trade on the long side if price clears the descending trend line at $31.10.
HLF just broke a multi-week trend line and now is looking heavy after a short-term bounce attempt failed. A break below $64 looks good to me for a single-day play on the short side. This stock is very news-sensitive and very volatile, so it’s not a swing candidate for me.
NUS is another stock that’s been very news-sensitive and volatile, which means I’m not interested in a swing trade. It does look set for a move here though, so I’ll opt for a single-day play on the short side if price breaks $75.50.
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.
DV is sitting in a bull pennant here and I like the risk/reward for a continuation play. Price needs to break the upside soon or this pattern would be negated. I’ll get long if it clears the upper trend line at $41.65, with a stop just beneath the pattern and looking for a lift in the coming weeks back toward historical levels. With nice recent momentum, this could prove to be a powerful pattern, but price will need to break out to get me involved.
RGR has been correcting and this short-term bounce sets up a new pivot for a play on the downside. I’ll get short for a swing if price breaks $64, and will look for the downtrend to continue. With earnings due out in May, there’s ample time for this one to make a move back toward former levels. Given how clean the trend line is, I’m only giving this one a little extra room above the highs of the last two sessions because I would expect a downside break to stick.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
