Good evening StockBandits!
The market stopped the bleeding today on the heels of a nasty selloff on Monday. The all-day decline to kick off the week saw only a tiny bounce into the bell and no safe place to hide, leaving traders wondering whether that’s the end of the bull run we’ve seen since November. This morning, a small gap higher opened the door for some quick selling, but it never arrived. Instead, after only a very minor dip off the morning highs, stocks turned higher at the 90-minute mark and never looked back. The recovery attempt shows bulls are still hanging around, even if today’s respectable gains didn’t quite erase Monday’s losses.
Today’s rebound brings forth a potential battle in the days ahead as aggressive bears look to short this bounce while bulls try to put the potential character changing selloff behind them. It’s important to remember that shorting into V-shaped bounces hasn’t paid off in 2013, but today’s bounce was not without its faults. The biggest is the fact that price didn’t fully recover, which created inside bars on the daily charts. Also of note was the lighter volume we saw today on the way back up, which points to narrower participation on the buy side than what we saw on the sell side yesterday.
If the market is truly trying to top out here, it’s typically going to be more of a process of failed bounces than a single event. One could certainly make a case for that process beginning here, but more technical proof will be needed before a top can be considered in place. I don’t want to be quick to dismiss Monday’s selloff. If anything though, it’s an indication that the market is simply becoming more volatile, which is another character change we need not ignore. Either way, the 2-way movement should bring more opportunity in the days ahead while simultaneously reminding us to exercise added caution as emotions start to ramp up on both sides.
As some of the bigger earnings reports start to roll in, we have additional catalysts for moves in the days ahead. I’m staying selective here with some very short-term setups which look to have some cash-flow potential while waiting for more swing-worthy setups to surface.
Let’s get to the charts.
NAZ – The NAZ returned to the 3263 area today, finishing a point above that level. Today’s bar was an inside day on reduced volume, which favors the bears. However, the bulls can point to a potential higher low with Monday’s low vs. the April 5 low. Either way, the two-way street is better than the slow-creep for trading, so we should start to see more opportunities on both sides.
SP500 – The S&P saw a partial recovery today with a big 1.4% rally. However, volume was light and this index is still 23 points shy of last week’s high. Bulls see a potential higher low, which should keep things interesting.
RUT – The RUT exhibited strength today but still stopped 1% shy of the 932 level. It’s also still 28 points shy of last week’s high, which is to say there had better be a lot more buying interest showing up soon or the bulls can expect more struggle in small-cap land after the formation of a lower high and a lower low.
DJIA – The DJIA is holding its breakout and now sits 131 points beneath last week’s high. This index also bounced back on reduced volume, which means continued caution is a good idea even with this index standing its ground for the moment.
Notable Names:
GS is an excellent reminder of what can happen around earnings. Today the company beat estimates with what looked to be blowout earnings, yet it suffered a decline on the day. Just goes to show, even if you were to know what will happen with the bottom line numbers, you don’t know how the market will respond to it. This is yet another reason why I avoid holding any position into earnings. This stock appears to still be in correction mode with a few lower highs intact.
SLV has seen an impressive selloff, yet still doesn’t act ready to rally yet. Today it bounced back 2.6%, but went out closer to its low of the day than its high. This points to many trapped longs who will be sellers on rally attempts. Best bet with a chart like this even for those wanting to get long is to wait for some stabilization rather than stepping out in front of the southbound locomotive.
UNXL is all over the map lately. Just a couple of weeks ago it rolled over hard, and since then it has fully recovered and today broke out on heavy volume. Some stocks are just too lively to trade for timeframes outside of the intraday charts, and this is certainly one of them.
GOOG is still pulling back and the descending trend line is the thing to focus on, currently at $800. Earnings are due out Thursday.
TRLA is basing here beneath short-term resistance. A turn up through $33.50 may offer a momentum play for nimble traders. This stock has held up well but has largely moved sideways in the past month, so my interest in a swing just isn’t very high despite this tight consolidation.
DDD has pulled back quietly from last week’s high and a new little descending trend line has emerged. A turn up through $34.80 could be worth a shot on the long side for active traders, but this base needs more work in my opinion before a swing is warranted.
FSLR is resting after a giant move here. This has potential for a pennant pattern, but needs more time to tighten. Should it turn higher through $38.15, it may offer a play for active traders, but I am not considering a swing here due to the lack of a well-defined downside exit.
New Swing Trade Candidates:
No new swing candidates tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
