Good evening StockBandits!
The indexes all reached new highs today, keeping the Tuesday effect intact (hat tip to Bandit member JB for the link). That link contains some pretty interesting graphics of the strength we’ve seen on Tuesdays since the November low, and it’s pretty impressive. At any rate, the bulls claimed another session as red-hot tech names like GOOG and AAPL cooled off while small-caps tacked on 0.8%. The DJIA closed above 15,000 for the first time, which will help to buoy confidence on Main Street as passive investors see that milestone achievement.
Aside from the day-of-the-week talk, the current lift continues to prompt some head-shaking as the NAZ, S&P and RUT have each advanced in 11 of the past 13 sessions. It’s been a one-way Street and that’s causing some frustration on both sides of the tape. Bulls can’t get a pullback to buy, and bears can’t get any downside traction to cover shorts into. It’s starting to look really easy right now to just be long anything, but any trader who has been around longer than April 18th (the last low) knows how that movie usually ends.
To say the least, this is a spot for caution. I’m in no way saying I’m bearish on this market – how could I be? We’re sitting at new highs and breakouts have held. That’s not a bearish environment. However, the current run is becoming extremely stretched. Not only does that make this a highly difficult spot for finding new buys, but it also leaves the market ripe for some selling in the short term even if it’s only constructive profit-taking. As such, I’m more open to the bearish setups at the moment where available, simply because they would benefit from a short-term market pullback (which seems overdue) – not because I’m looking for a return to S&P 1400 anytime soon.
Some amateur traders attempt to call turning points in the market and in this case, attempt to short into new highs expecting a selloff. The more common mistake however is to enter positions after extensive strength, and then to become fully confused once a pullback finally sets in, not knowing where to draw the line on new positions which suddenly start moving the wrong direction. Veteran traders on the other hand respect the market’s tendency to move both ways, and in situations like this they neither fade the move nor chase it, opting instead to patiently wait for better opportunities. That’s what I’m attempting to do here, as there just aren’t a lot of compelling setups after this one-sided move and I have no interest in trying to get in front of it.
Let’s get to the charts.
NAZ – The NAZ posted another gain today, albeit a small one, to keep the current rally going. This index was stretched before last week’s gap and now has 56 points of room on the downside before that gap would be filled. It’s extended here to say the least.
SP500 – The S&P has almost 2% of room on the downside here before the breakout zone would be threatened. More importantly though, it has some 90 points to the April low. That gives it a great deal of room for a pullback to result in another higher low.
RUT – The RUT left a wide channel last week with a projection up to the 1015 area if a measured move plays out. Here it’s building on its breakout from 954, which should serve as short-term support if we see some selling arrive sooner than later.
DJIA – The DJIA isn’t extended like the others, but it has been up 10 of the last 13 sessions. Today it made another new all-time high and now has some 170 points between current prices and the breakout zone, which gives it some breathing room for now.
Notable Names:
TSLA finally ran out of gas energy today and reversed hard to finish in the red. This stock has made a pretty relentless run in recent weeks and today’s reversal points to fatigue finally setting in.
ANF is at upper resistance here after a big day today, and could break out tomorrow through the $52.60 area to make a new high. This multi-month channel could deliver an $8 measured move, but after a wide-ranging bar today it’s just too difficult to determine a stop for a swing.
WFC is breaking out here after a multi-week rest phase, joining yesterday’s positive character change in GS as another financial stock which may be turning the corner to start helping out the S&P.
CRI is basing here and a bit more lateral movement would help this pattern take on a more mature look. Today’s strength indicates it may not wait though, so if it goes on Wednesday I like this one as a momentum play above $66.25.
FTK is coiling here beneath resistance and could break out any day now through $16.60. At the moment, I only like it as a momentum play through that level though since no well-defined swing stop is prevalent on this daily chart. The basing action in recent weeks has been very sloppy aside from the clear-cut resistance just overhead.
AU is starting to crack rising support here and still looks to have a bit of room for a momentum play on the short side beneath $18.25.
New Swing Trade Candidates:
These stocks look ready for imminent multi-day moves. Pattern confirmation occurs with a move through the entry level. Initial stop and target levels are also provided.
DHI is wedging here after a big advance and could get going again any day out of this pattern. I’m looking to get long above $27.05 with a stop just beneath the base in case of a reversal. Earnings for the most recent quarter have already been announced, so this one has ample time to make a move.
DECK had a character change a few weeks ago and now looks set for another leg lower. I’m looking to short this stock upon a downside break of this base at $53.30 for a swing.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
