Good evening StockBandits!
The strong start to the holiday-shortened week on Tuesday was followed by a steady grind lower after the first hour, and then today we saw follow-through selling. That means evaporation of the gains we saw yesterday morning, leaving many bulls to wonder just what happened. The DJIA in fact finished tonight beneath Friday’s closing level, while the NAZ filled its Tuesday morning gap and the S&P got to within just a couple of points of its short-term support zone.
Last night I mentioned that the bears could make a case for a failed bounce, and it appears as though they’re trying to do exactly that. The technicals support that claim as well. It’s important to note though that the trading ranges outlined here last night are still intact for now. At the very least, we are seeing some rest, and that’s a very good thing for the overall health of the market – and for us as traders. This will no doubt lead to more setups, and it’s quite nice to see some 2-way price action rather than the nonstop grind type of move we saw right off the mid-April low for nearly 5 weeks.
The issue I’m finding is that the slightly more violent back-and-forth of the past few sessions has left many charts just a bit too wide. I prefer swing trades with roughly 5% of risk or less from the onset of the trade, but I’m seeing quite a few setups which have north of 8% of risk from the trigger price to a swing stop. For that reason, I’m forced to stick with abbreviated timeframes for now, but I do expect that a bit more basing action will be able to establish some tighter bases and therefore more swing plays in the days to come.
By the way, be sure to submit your stocks for review for Thursday’s video.
Let’s get to the charts.
NAZ – The NAZ filled the gap from Tuesday morning and then recovered a bit, but still shed 21 on the day. It’s got 45 points of room on the downside and 65 on the upside before it would threaten to leave this range.
SP500 – The S&P got to within 5 points of 1635 support today, then lifted slightly to erase some of the early losses. Nonetheless, it quickly gave back Tuesday’s early strength and that leaves a short-term lower high in place for now.
RUT – The RUT has 16 points of room on the downside to support, and 22 points of room on the upside to resistance. That leaves this index just about in the center of its range after a 1% decline in today’s session.
DJIA – The DJIA has pulled back to the lower end of the trading range, although it still has a little room before support gets threatened.
Notable Names:
AAPL is coming to a point of decision with this wedge becoming very tight, and the next direction could either benefit or weigh on the NAZ considerably. This stock has a few levels to watch once it leaves this wedge, and should be on the radar as a potential market tell.
CELG is at the lower end of its uptrend channel, giving dip-buyers something to consider here. Given the lack of lasting upside since April 12th (it’s up 9c since then), this doesn’t look too compelling as a long to me. However, if it happens to break the channel in the coming days, it might warrant consideration on the short side at that point.
BBRY is nearing the lower end of its multi-month wedge here after a couple of weeks worth of steady selling. This offers a well-defined play for those interested, but once again the lack of recent strength removes my interest in trading the long side.
DDD is at trend line resistance here after a bit of a pause in the last couple of weeks. A turn up through $48 interests me for a momentum play on the long side, as the $52 area could get tested in short order. This isn’t a swing candidate for me however due to the wide stop that would be necessary.
DECK is tightening by the day in this wedge but still could stand to spend a bit more time between the lines. Should it happen to go early with a breakout through the trend line at $55.50, it looks good for a momentum play. As a swing, it needs upwards of 8% for a stop, which for me is just too much room.
AMBA is looking ready to pop again and if it clears the $16.50 trend line, I’ll take it for a momentum play. A swing stop would just be too far away (beneath last week’s low), so I am not considering this for an overnight.
ALK is starting to crack here and could see a quick decline if it gets through $55. I like this for a momentum play, but not as a swing – once again due to the very wide stop that it would require.
New Swing Trade Candidates:
There are no new swing candidates tonight, sticking with existing positions while waiting for high-quality setups to emerge which have favorable risk/reward profiles.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
