Good evening StockBandits!
The new week kicked off today, and given that it was a Tuesday, the ho-hum routine of the buyers kicked into autopilot and another rally was seen. This extended the streak to 20 straight Tuesday rallies for the DJIA, preserving the second day of the week strength pattern which began January 15th. As silly as it might seem to think that getting long simply in expectation of Tuesday strength is a wise strategy, it has in fact paid off quite consistently for those who have chosen to follow it.
Elsewhere, we saw strength in each of the other indexes alongside the Dow. The NAZ gapped higher by over 1% (38 points), pushing past 3500 again but couldn’t hold it. The S&P got to within 13 points of last week’s high, and the RUT moved back above 1000 to get within 3 points of last week’s 1008 peak, although neither of them could maintain those achievements. Clearly, it was a strong morning, but ultimately the market faded back from the highs with a slow grind retreat after the first hour. The result was gains across the board, but the day didn’t exactly scream “strength” given the selling that took place between the opening bell (post-gap) and the closing bell.
It was an up day, but a bit iffy. Tops tend to be a process, and today’s early spike and subsequent failure to clear last week’s highs could be viewed by the bears as a potential open door. We’ll find out soon enough, but this looked like a possible second-chance exit for bulls who prefer to lighten up into strength.
I entered two new swing positions, one of which was the MPC that had been listed over the weekend. I was asked about the gap in that stock this morning by several people, so just wanted to be clear here regarding that. My gap strategy is outlined on the Swing Trading Strategy page and it is essentially a scale-back approach whereby I can chase a gap to a certain extent, so long as my position size is considered. As a stock gaps farther beyond my intended entry (trigger price listed with the original play), it simply changes the risk/reward of the play so I want to be mindful of that and scale back my risk via smaller size if the stock gaps beyond 1%. Any gap beyond 3% is a skipped trade, as the profile of the setup by then has changed dramatically.
Let’s get to the charts.
NAZ – The NAZ finished 26 points off its high today, yet still added 29 for the session. This suggests either some fatigue after last week’s rejection from the highs or simply a short-term trading range. At the very least we have some levels to keep an eye on, including Friday’s close at 3459.
SP500 – The S&P gave up almost 1% from its session high to the close, ending in the center of this trading range.
RUT – The RUT is still within 1% of its high but looking like it too might spend a little time between short-term support and resistance based on today’s close.
DJIA – The DJIA has some room to fluctuate up or down here before the trading range would be threatened, so I’ll keep these two levels at the forefront until one gets crossed.
Notable Names:
TSLA is the picture of momentum and the reason why calling a top in a momentum stock can be so dangerous. This one tacked on $13 and change today to continue its run. Hopping on board for a ride here might entail some quick gains, but it also brings with it elevated risk due to the fast-moving nature of this stock. Stops should be in place at all times no matter which direction it’s being traded.
APO is a good example of what a stock looks like when it gets toppy. This one might prove me wrong and move higher, but the recent action tells otherwise. After a big rally, price has become more volatile and now we’re seeing a bit of a complex top setting up with a number of recent failures. Anytime you see this, it’s reason to become more cautious on a stock and/or raise cash.
CLDX is working on a large wedge and needs more time to tighten before I’d consider a swing, simply due to the width of a stop based on the current pattern. Nonetheless, it may offer a momentum play on the long side if it breaks out above $13.25. Today the stock was rejected at the trend line so it may not be ready, but if it goes tomorrow it’s on my radar for a play to capture the initial breakout but not as an overnighter.
FTK is nearing breakout territory and a push through to a new high at $17.80 will trigger a buy for me as a momentum play. This one also would involve a stop that’s simply too far away for a swing, hence the reason I’d only be interested in the initial breakout move.
AEGR is perking up here and may see another pop if it can clear the trend line at $61.40. Given the recent momentum, the next lift could be worth a quick play. Once more, a swing stop would go below last week’s low, which is too far away for me. I’m also very careful with swing trades in drug stocks, and this is one I’m just not willing to hold overnight.
AU is still poised for a breakdown here, just as it was last night. It got 2 cents from triggering today and held above support. I’ll give it another shot tomorrow for a short sale if it undercuts $16.20.
New Swing Trade Candidates:
No new swing candidates tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
