Good evening StockBandits!
The indexes all reached new highs again last week, ignoring the notion that a pullback is due. Despite being stretched to the upside since their lows of April 18th, they nonetheless gained ground to the tune of 1-2% across the board. The bears can’t get any traction, and underinvested bulls can’t get a dip to buy. That’s keeping a persistent bid beneath this market and has so far kept profit-taking to a minimum.
The difficulty for traders – regardless of timeframe and regardless of directional bias – is finding plays in this kind of environment. The one-way move of the past three weeks has left many would-be bearish charts looking neutral, and it has taken nearly all the bullish stocks much higher. That means very little to no basing action in most cases, leaving tons of charts in uptrends but not necessarily in places where new entries are prudent.
My trading style has always been to seek out the best setups and then put them on as they surface, but the lack of consolidation and digestion phases in recent weeks has just diminished my activity level. I’m unwilling to lower my standards just for the sake of participation, but the nonstop lift has had very little to offer those of us who care about risk management. It’s not a matter of expecting continuation or not, but rather it’s about locating appropriate downside exits in case of a pullback (which will certainly come) and that’s the part which is next to impossible of late.
I’ll continue to exercise patience in finding new plays, as they will at some point begin to surface more frequently. However, participating between now and then is largely going to consist of abbreviated holding times (momentum / cash-flow types of trades) with the occasional new swing thrown into the mix. I’m holding a handful of names now, but am just not eager to add to my exposure with the NAZ having just rallied 9% in 3 weeks. The tape isn’t weakening just yet to warrant aggressive shorting, and yet it’s equally difficult to locate prudent buys with so many names looking so short-term extended.
Let’s get to the charts.
NAZ – The NAZ just added 9% in about 3 weeks, which simply isn’t a sustainable pace. Nonetheless, the bulls remain in charge here and there’s no reason to become bearish even if a short-term pause is becoming overdue. I’m simply not going to chase new entries to add to my current swing exposure and this price extension is a reminder that just because momentum is present that throwing caution to the wind isn’t wise.
SP500 – The S&P continues to grind higher since its breakout two weeks ago through 1597 resistance. It has some breathing room here to potentially pull back on profit-taking and perhaps still hold the 1597 level. Either way, a higher low looks likely on the next pullback after this 100-point advance. Based on the height of the rectangle pattern it just broke out from, this index could see a measured move up to the 1665 area. At this pace, it wouldn’t take long either.
RUT – The RUT closed at a new all-time high on Friday and now stands 21 points above the breakout zone. That allows for some room should profit-taking kick in, although the last pullback low is now nearly 80 points away. A measured move from the rectangle pattern takes this index up to 1015, although pauses along the way could make that an easier accomplishment.
DJIA – The DJIA keeps easing higher since its breakout and still has room to fulfill a measured move to the 15380 area based on the height of the rectangle pattern it just left behind.
Notable Names:
AAPL is pulling back a bit here after a big rally from its low from $385. This stock now has ample room to create a higher low on this dip, at which point the bullish scenario becomes much better in this stock.
GOOG is at all-time highs here but has ramped considerably in recent weeks and now is looking extended. That’s not to say the run is done yet, but simply that this is not a spot for making new buys. Some profit-taking would be healthy at this stage and would actually help to prolong the duration of the rally. The sharper moves become, the more reversal prone they tend to be.
MELI is trying to base here over the past few days but still needs a little more time to let this potential pennant tighten further. This stock has made a big move but may not be done yet.
NXST is vaulting higher here after an accelerated uptrend which has left this stock going parabolic. This stage of the rally can produce the biggest gains in the shortest period of time, yet it also involves elevated risk due to the potential for fatigue to set in.
ANGI is setting up here for a possible turn back up and I like it for a play here. This is not a swing for me due to the very wide stop it would need, so I’m just watching it for a momentum play above $23.70 whereby I look to participate in the initial push through that level and then stand aside without taking it overnight.
BPOP is facing a breakout here and a push through $29.85 could free it up for a quick spike higher. Here again, there’s no real well-defined swing stop close by, so I like this for a momentum play instead.
BEAM has been known for quick rallies of late which then fizzle out, and it may be setting up for another here soon. A push through $68.25 looks good for a momentum play on the long side, as the initial move is likely to be the best. I don’t plan to take this one overnight unless this base matures further in the coming days to provide better risk/reward as a swing, in which case I’d update it here. For now, it’s just a momentum candidate.
KKD is stalling out here after a feeble, low-volume bounce and looking vulnerable to another rollover. I like it for a momentum play on the short side, but since I’m not looking for a very big move (possibly $12.50 or just below for a test) this is not a swing candidate for me.
LNKD is breaking its uptrend line here after selling off post-earnings, resting, and now weakening again. I like this for a momentum short below $170 with potential for a quick test of support levels at $165 and $155. There’s still a chance this stock is simply range-bound, which removes my interest in taking it as a swing.
New Swing Trade Candidates:
No new swing candidates tonight, staying with existing positions while waiting for new setups.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
