Good evening StockBandits!
If April showers bring May flowers, then it’s shaping up to be one heck of a garden next month because right now it’s raining stocks. There seems to be no safe haven for risk to head other than the sidelines given the downside continuation we saw last week. The NAZ and RUT continued to lead the way lower (giving up over 3% each last week), only now the S&P 500 and DJIA have each also broken down from their respective trading ranges. I’m not sure it’s wise to write off the bull market just yet, but it sure isn’t looking good!
We’re starting to see more unity among the averages now with the senior indexes following the more speculative NAZ and RUT, which should make for some better trading. Although we have more lower highs in place for the latter indexes, to see the former averages join them directionally with breakdowns certainly makes for a more uniform market environment.
Anytime the price action heats up like this and we’re seeing greater emotion in the market, two camps start to get more vocal. One of them is the “sell everything and run for the hills” camp, and the other is the “endure the storm and stay the course because we’re going much higher from here” camp. My suggestion is to stay level-headed about it all and disregard opinions entirely. Formulate your own based on the price action, because the only thing we can rely upon is the price action and it’s the only opinion which matters. If we’re beneath support (as we are tonight), then the path of least resistance is down. Plain and simple.
Earnings season begins in earnest this week, so be sure to keep a close eye on the earnings calendar and check the date on any stock you’re holding overnight. I like to use EarningsWhispers and Yahoo! Finance primarily, in order to avoid any big surprises. They’re great sites to bookmark as quarterly reports start rolling in.
Let’s get to the charts.
NAZ – The NAZ now has 3 confirmed lower highs since topping in March, and now it’s coming into a major level of 3966. We’ve seen a couple of triple-digit declines here though, which is to say it’s an emotional tape and not necessarily one which will show respect for key levels. The outlier factor is that it’s short-term stretched on the downside as it comes into this key area, which may allow for a bounce. It’s an emotional tape, however, so despite 3966 being a verified level on both sides in recent months, there’s no guarantee we hold it if it’s reached. The key is to stay attentive to the price action and not to count on lasting upside until ample stabilization has arrived.
SP500 – The S&P decisively broke 1850 last week and then 1823 by Friday’s close. The failed bounce mid-week created a lower high and now prices are hitting the dirt quickly as more retracement of the February lift unfolds. 1775 is the next big level to watch should we happen to see more downside from here.
RUT – The RUT is getting hit hard here and also has 3 confirmed lower highs in place. Next potential area of support is 1079, and at the pace it’s moving, that’s not too far away. Right now we’re seeing the opposite mindset of dip-buying, which is that higher prices are being used to raise cash repeatedly.
DJIA – The DJIA failed its breakout attempt, fell back into the range, bounced to a lower high, and now is trying to break down from the range. If it’s successful, there’s no nearby support zone to watch and we could see the selling pressure intensify quickly.
Notable Names:
RHT had a big gap higher last December, but it eventually got filled. Just 3 weeks ago we saw a new low established, a bounce back to test that zone from below, and a failure. Since then, prices worked lower to fill the gap. Even big gaps frequently fill, they just sometimes take considerable time to do so.
APC is still constructing a bull pennant here as it pulls back in an orderly fashion (so far) from its recent high. This stock hasn’t undergone a negative change of character, but I’m just going to keep it on watch until price can pressure the upper trend line of the pennant. Tonight it’s hovering near the lower portion of the pennant, so I’m not setting up a play yet.
PTEN is holding up nicely within this multi-week channel above the prior base. That’s bullish, but until price pressures the upper trend line to threaten a breakout, I don’t see a play. This is another one on my radar but I have no play set up yet since price is sitting in the center of the channel and appears to need more time.
VALE is possibly completing a short-term dip here as evidenced by the lift from the low on Friday to finish only 5c lower on the session. A push north of the trend line at $14.85 on Monday would trigger a single-day play for me on the long side but just for a single-day move back toward the recent high.
NEM broke rising support on Friday but still has room to continue lower here. I like it for a single-day play on the short side if it makes a new low at $23.95 to show some continuation.
SCTY is at short-term support here and a new low at $52.90 could easily trigger more sell stops. The trend is down here and looks likely to continue, so I like it for a single-day play on the short side if that level gets broken on Monday.
GOGO has returned to major support and looks vulnerable to a breakdown soon. A new low at $17.95 on Monday and I’ll take it for a single-day play on the short side. Like the others listed above, this just isn’t a swing-type of setup despite the importance of the support level because the base itself (and therefore a swing stop) is just too wide and loose. So I’ll opt to participate in the initial move and return to the sidelines before the closing bell.
New Swing Trade Candidates:
No new swing candidates tonight, sticking with light exposure as correction continues. Bearish stocks are largely oversold, and few bullish candidates look promising for anything besides quick flips until the broad market is able to stabilize.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
