Good evening StockBandits!
The relative weakness seen last week in the RUT as the other indexes broke out was highlighted here over the weekend and discussed again last night. Today we saw the senior indexes (DJIA and S&P 500) each able to reclaim their breakouts, while the NAZ proved unable to do so. Furthermore, the RUT continued to bleed off to test the lower boundary of its 3-week trading range with a touch at 932.
Small-caps had led the way higher off the November low, yet now they’re notably weak. Paired with the breakouts to new highs in the blue chips, this makes for a tale of two tapes. The bulls can point to the reclaimed breakouts tonight as a sign of strength, while the bears can point to money flowing out of speculative small-cap names as an indication of weakness. One day soon, we’ll see which side is correct when the averages begin to move in sync again. For now, it’s a tricky market and there are no clear signals.
There are plenty of market-moving events scheduled in the near future, from Bernanke (Thurs) to econ reports (Jobless Claims on Thurs, Employment Situation on Friday) to earnings which will start rolling in more heavily in the next two weeks. Until then, we’ll need to keep paying close attention to the price action and the character of the moves in order to determine a bias. The trends are still up, but in recent days the divergence between the large-caps and small-caps has added some fog to the picture.
From a swing trading standpoint, I triggered on a new short today (JNPR) while getting stopped out of a couple of longs (both railroads: CP & KSU). I still do not see any highly compelling setups for establishing new plays as we head into tomorrow, so I’m again going to be patient and let the charts build further. The hesitation with breaking out over the past 3 sessions along with the sudden weakness in small-caps has made for some messy charts, so rather than put trades on for the sake of activity I’m going to stay selective and maintain a high standard. As new setups arrive, I’ll have them here.
Let’s get to the charts.
NAZ – The NAZ tried again today to break out above 3264, but of the past 3 sessions, only Thursday saw a close above that level. Since then, we’ve seen this index twice fail to clear that level on a closing basis, adding some urgency here for the bulls to take short-term control in order to avoid a move back toward the lower end of the range at 3200.
SP500 – The S&P broke out last Thursday, hesitated yesterday with a failure, then reclaimed the 1564 level today by finishing at 1570. The all-time intraday high stands just 6 points away, but so far this breakout isn’t showing much vigor. The previous push through lateral resistance was when this index cleared 1530 when it posted gains in 7 of the next 8 sessions.
RUT – The RUT gapped higher this morning then marked its high of the session in the first 15 minutes before reversing lower to test the 932 support level. This index only managed a tiny bounce from there into the closing bell, leaving it vulnerable to a breakdown out of this 22-point channel if buyers don’t emerge right away.
DJIA – The DJIA posted a solid gain today and may be on its way to the 14740 area to complete a 180-point measured move out of the channel pattern it’s leaving behind. Main Street is still celebrating new all-time highs for this index, but it’s going to need the other indexes to do their part if this rally is going to continue.
Notable Names:
VLO is testing key support here above an unfilled gap which extends down to the $38.81 level. Today’s decline was decisive and came on heavy volume, carving out a lower high and leaving this stock in danger of finally starting a more meaningful correction after a very lengthy rally.
X is at key support here after a 32% selloff from the January high. This stock maybe short-term oversold after the steep decline of the last 2 sessions, and today’s volume smelled of some short-term exhaustion. While this stock may be able to manage a quick bounce from this area, it isn’t looking bullish yet and first needs to stabilize. It does have a history of sharp reversals, so this test of major support will have some interested observers over the next few days.
LNKD is leaning on multi-week support at the lower end of this channel pattern, and a breakdown could leave this stock quickly moving toward the $150’s. It does have a minor lower high within the channel and has made a huge move higher in recent months, so momentum players may find a play here on the short side for a quick retreat if profit-taking produces a break of the $171 level. This is not a swing for me, as there’s no well-defined exit should it happen to reverse higher.
BX is trying to hold the key $19.30 area here which was resistance in February and early March, and now is serving as support. I’ll be watching the descending trend line which currently stands near $20 as a possible pivot for a play on the long side. I’d prefer this stock stabilizes first and the descending trend line gets lower to provide better risk/reward for an eventual trade candidate.
YHOO is potentially gearing up here for another pop, although this base is considerably smaller than the previous two bases which each lasted about 11 trading days. Nonetheless, this one may offer a quick momentum play above $23.95, but I won’t be taking it for a swing.
BK has pulled back quietly to test the lower end of its uptrend channel and now price is getting squeezed between rising support and a short-term descending trend line. A turn up through $28.25 would clear the descending trend line and open the door for a possible move higher within the channel, although earnings are just 2 weeks away and that simply isn’t enough time for me to take a trade in a stock like this which tends to move somewhat slowly. That may make this more of a momentum play for the nimble trader, but it is not a swing candidate for me.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for higher-quality patterns.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
