Good evening StockBandits!
The rebound we saw Tuesday came with questionable volume, only a partial recovery of Monday’s losses, and painted inside bars on the daily charts – all of which last night I outlined here as faults which shouldn’t be ignored. I also mentioned the likelihood of a topping market being based on failed bounces, and today we saw yet another as Tuesday’s gains were entirely erased in the first half of the session. We saw an early afternoon bounce, but it was feeble and minor before some late-day selling kicked in. Ultimately, the averages made new pullback lows today with declines of 1-2% across the board.
The failure to build on yesterday’s strength certainly dilutes some of the arguments which bulls had as recently as last night, while simultaneously giving the bears some deserved credit. We’re back near important levels on each of the index charts, and volatility is picking up. That equates to elevated concerns and uncertainty, and traders are locking in recent gains just in case this develops into something uglier. At the moment, we’ve seen pullbacks off the highs of 1.8% for the DJIA, 3.2% for the NAZ, 2.9% for the S&P, and 5% for the RUT. The latter, of course, has been the focal point here for the past few weeks since leading the way higher off the November low yet failing to clear key resistance (954) during Easter week when the others were each breaking out.
At this point, it’s largely a hurry up and wait situation. Chasing the selloff by initiating new shorts here carries significant bounce risk, while getting long in the face of a pullback carries significant risk of being ‘early’ (wrong). There are very few bases at this moment, so it’s a time when I’m content to exercise patience while letting some new patterns build.
With emotions running a bit higher than in recent months, it’s a time when moves in either direction can carry farther than may seem logical. There’s a slew of outside influences at the moment, from suspicious letters arriving in D.C. to breaking bombing news to econ reports to North Korea to earnings announcements. Toss into the mix some charts with conflicting messages (DJIA still holding up, RUT breaking down), and there are plenty of reasons to lay low temporarily. That’s my plan.
Let’s get to the charts.
NAZ – The NAZ got below 3200 again today only to rally back enough to finish slightly above it. That has marked the low end of the range for several weeks with only a few exceptions. Volume is pointing to distribution, and should this index undercut the prior low of 3168 it certainly will be of concern to the bulls and may mark the end of the rally which began in Nov.
SP500 – The S&P held uptrend support today which goes back to November. A move below that would not end the trend, but with support zones of 1538 (since March 19) and 1530 coming quickly into view, it wouldn’t take much to see lower lows for this index. If that occurs, it could add some credibility to the notion that 1597 may stick as a high for a little while.
RUT – The RUT got below 900 today for the first time in nearly 7 weeks, but held above 894. That’s the big line in the sand for this index, although it has already painted a lower high and a lower low in the past 2 weeks. The lower end of the range is approaching, so the bulls will definitely hope to hold it.
DJIA – The DJIA remains in good shape here as it tests 14563, the former resistance zone from a few weeks ago. Should the other indexes continue to deteriorate, this one won’t be immune to some heavier selling pressure.
Notable Names:
AAPL weighed heavily on the NAZ today with a 5.5% decline. The $419 level broke and quickly this stock gave up another $21 before finding some buyers. Next support is $355, although with earnings next week on Tuesday anything could happen. At any rate, this stock is still in correction mode from the $705 high.
DFS is working on a wedge here as price pulls back into a key level. I’d like to see this pattern tighten further in the coming days before considering a buy. $41.80 is the level it needs to hold, but the descending trend line needs to be cleared to pave the way for some additional upside, and that currently stands at $43.50.
RGLD epitomizes the gold and gold mining stocks as it has just been thrashed in recent days even after a multi-month pullback. This stock is nearly off 28% from its high earlier this month, yet still isn’t finding buyers. Today it finished just $0.13 off its low, so the capitulation-type volume still needs to be paired with an upside reversal before a decent bounce can be expected.
TIF is narrowly holding uptrend support here near $70, but the lack of a lift from there today prevented me from setting up a trade despite the very tight risk this setup entails.
HPQ is well off its recent high but it’s trying to undercut a key level here at $20.50 which could cause further selling pressure. This one is too stretched for a swing, but may offer a nice momentum short below $20.35.
NUS is challenging multi-day resistance and a breakout through $50.05 could deliver a quick run to $51.50 as a momentum play. I don’t like the risk/reward here for a swing.
DDD was highlighted here last night but did not clear the trend line. Tonight that trend line stands at $34.60, and a push through it could produce a nice pop for a momentum play. Earnings are less than 2 weeks out, so for the amount of risk necessary for a swing, there just isn’t a lot of time for this one to work, therefore it remains a momentum setup for me.
GILD is coiling just beneath highs and has held up extremely well. A push through $52.50 may be worth a momentum play on the long side, but earnings are due out next week so I won’t be taking this for a multi-day swing.
New Swing Trade Candidates:
No new swing candidates tonight. I have been reduced to just 4 open positions. My selective approach and willingness to trade both sides lately has presented some nice opportunities, but at the moment with the charts still largely sloppy, I’m not looking to add exposure. As more setups emerge, I’ll certainly have them here, I just won’t force trades in the meantime.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
