Good evening StockBandits!
Today stocks continued the relief rally which began Friday with 1% gains across the board. The session was marked by a gap higher this morning, some continued upside drift, and then mostly some churn for the remainder of the day. I say ‘mostly’ because at mid-day things got shaken up quite a bit, but only temporarily. The Associated Press account at Twitter was hacked and some erroneous tweets regarding explosions at the White House and injuries to President Obama briefly rocked the market, prompting an abrupt drop in the DJIA of some 150 points over the course of just a couple of minutes. Traders will always sell first and ask questions later. Immediately though, other AP writers tweeted that the reports were false, which the White House also confirmed, and stocks lifted right back to where they had been as if nothing happened.
It provided quite a blip on the intraday charts, although anyone who stepped away for just 5 minutes or so would not have known otherwise. It’s quite amazing that technology has outpaced regulation, and we now find ourselves in a day and age where traditional media outlets can be quite late to developing events as they check sources (responsibly) before reporting. To think that someone can hack a social media account or guess a mere password and disseminate erroneous market-moving information on such a big scale is something that just a few short years ago was simply not possible. It truly is a new era!
Back to the market though, this has been an impressive 3-day lift off the lows from last Thursday. The bulls certainly have some momentum here, and tonight’s lift in AAPL shares in extended-hours trading points to a lift for at least the NAZ tomorrow morning. However, I’m inclined to watch out for a bit of a sell-the-news response. As market prices become stretched and this V-shaped rally leaves so many names short-term overbought, conditions ripen for some profit-taking to kick in. Should we happen to see that, it would set up a potential lower-high scenario in the indexes. That’ll be on my radar tomorrow morning as we see whether this evening lift is able to translate into an opening gap to the upside, and of course soon find out whether that gap can hold or if instead it gets sold.
I continue to find very few quality setups for new swings. Aside from it being one of the busiest earnings weeks (as 1/3 of the S&P 500 reports), the sharp declines seen last week and the subsequent sharp rally since then has left many charts looking very sloppy. I’m sticking with existing positions and otherwise just looking to a handful of momentum setups for some cash flow while waiting for better bases to develop. And they will, it just might take a couple of days.
Let’s get to the charts, and tonight I’m going with the major ETF’s just for a little different perspective.
QQQ – The NAZ 100 ETF remains in a $10 trading range going back to early 2012. It has lifted considerably from November but still stands $1.13 shy of breakout territory. Should this ETF prove able to clear resistance, a move toward $80 may follow (projected move being the height of the rectangle pattern). Otherwise, it’s nearing resistance and the burden of proof is on the bulls for the longer-term time horizon.
SPY – The S&P 500 ETF tested the lower boundary of its uptrend channel last week but has since lifted. It now stands about $2 shy of the all-time high of $159.71. Should this V-shaped rally happen to fizzle out beneath that level, it would result in at least a short-term lower high, so the next few days may prove critical for the bulls if they want to maintain the pace of this trend.
IWM – The Russell 2000 ETF is currently right about the center of its trading range, sitting well shy of the $95 resistance area but still with some cushion before support would be tested. That means anything goes while we’re between the lines, keeping trading a bit more tricky.
DIA – The DJIA-based ETF is also in a high channel pattern here, $1.86 beneath its highs but $3.30 above recent support. It’s important to recognize that minor moves between these levels have no intermediate-term impact, and therefore should be treated for quick flips since momentum cannot last until this range gets broken.
Notable Names:
HAL is pulling back in the short term with lower highs and lower lows, although since last November this looks like a minor pullback in the bigger-picture uptrend. It’s all a matter of timeframe, but for now resistance stands at $40.65.
KBH is a nice example here of a stock that’s doing nothing lately but going back and forth. It’s easy to get chopped up in such conditions, which brings importance to the longer-term chart. There we see an uptrend which is still intact, as well as a couple of previous periods like this where price simply needed to rest. Zooming in and out on charts can really help to bring some perspective, so be willing to mix it up a bit.
CTSH is selling off rapidly with quite a streak here of consecutive declines. It’s also coming into key support, which many will view as a potential zone where the stock may bounce. Although I’m not opposed to such a view, it’s critical to wait for that to actually happen rather than simply establish a position and hope it pans out. When emotions run hot like this, levels take a back seat to the pain that drives these kinds of moves.
LNKD is trying to leave this high-level ascending triangle pattern. This pattern would need to tighten substantially for me to entertain thoughts of a swing trade, as currently a stop beneath the base would be nearly 10% away from an entry trigger. That’s more room than I’m willing to give a swing, so this is simply a momentum setup for active trading.
MPEL is basing here beneath resistance as rising support catches up a bit more each day. If this base can tighten further for several more sessions, I’d be interested in a swing. However, should it happen to break out early through $23.80, this is a better momentum setup with tight stops while capturing the initial breakout move.
ABX is sitting on short-term support after a huge decline, but it may not be done. With volume having swelled past 50MM shares lately, this one may be nearing a climax. For that reason and the distance to an adequate stop, I’m not interested in a multi-day swing, but a break below $17.40 offers a play on the short side as a momentum play. Earnings are also due out Thursday.
AGU is testing support here and a break below $90 may see more sellers enter the picture. This base just isn’t very big though considering how far the stock has traveled in the past 5-6 weeks, so I like it better for a momentum play than for a multi-day swing here.
New Swing Trade Candidates:
No new swing candidates tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
