Good evening StockBandits!
The bounce which began the previous Thursday and Friday off key support zones carried over into Monday of last week. However, it proved unable to continue any higher as prices retreated through Wednesday. Another spike higher on Thursday failed to exceed the Monday high, keeping the short-term lower high scenario intact for now.
The other thing that’s intact right now is the trading range we’ve been watching for the past few weeks. The action since the May 22 peak has been choppy to say the least, with frequent changes of direction and the standard lack of follow through in either direction which accompanies these rectangle-type patterns. Overall, it’s healthy to see the market consolidate, it just makes it easy to overtrade as few positions find lasting traction and both bulls and bears tend to grow frustrated.
A case can be made for a resolution in either direction at this point, truth be told. On an intermediate-term basis, these channels could provide solid foundations of support should we happen to see new highs made. From a near-term point of view, we’ve seen a retreat from the highs and bounces aren’t sticking, so it may simply be a matter of time before multi-week support gets undercut.
As I’ve said here many times, the key is not to predict the direction of the next move. Our aim as traders is to identify high-quality opportunities for putting capital in the way of limited risk when there appears to be potential for a multiple of that on the reward side. It’s really that simple, but too often traders get caught up in the prediction game. Avoid that mistake, and keep focused on what matters right now: the trading range is still in place.
There have been very few swing opportunities of late due to the width of the bases which have been building, as well as the lack of continuation in the price moves. Some patterns are still developing and after a bit more time, we could indeed have our hands full with opportunities. For now, I’m staying nimble and light and keeping the bar set high for new plays.
Let’s get to the charts.
NAZ – The NAZ gave up 1.3% last week after painting on Monday what so far is a short-term lower high. There’s still some room down to support at 3370, but the bulls still seem to be struggling here to produce follow through.
SP500 – The S&P shed 1% last week and now has a short-term lower high at 1648. The big level is 1597 down below, so there’s room for this index as well, but again the same issue is the fact that upside has been fleeting since the high on May 22.
RUT – The RUT tagged 970 last week and held it, but isn’t far away from it after another decline on Friday. A break below 970 opens the door for a retreat to 954, which was resistance prior to the May breakout.
DJIA – The DJIA rallied to 15300 last Monday and then turned lower, finishing the week 230 points beneath that level. It remains above 14887 for now, but with the lack of lasting upside these past few weeks it may only be a matter of time before we see support get broken.
Notable Names:
PCLN is a very expensive stock, but it’s optionable. Here it’s setting up for a move, and a breakout above this pennant at $821.50 could bring a return of the momentum we saw in early May.
CSIQ is working on a large wedge here and needs a bit more time to tighten. Price isn’t currently challenging the upper trend line but in the days ahead it may, so I’m keeping it on watch.
RDN is coiling beneath a descending trend line here, and if it can stabilize early this next week it may offer a play. I’ll keep it on watch for now.
DDD is still holding a spot on my watch list as it works on this triangle pattern. Price is right in the center of it, but I’m watching it carefully as a breakout could occur soon. The upper trend line is just north of $50.
AMBA is challenging resistance here and a breakout through $18.05 will open the door for some acceleration. The price action has been pretty messy in recent weeks with quite a few wide-ranging bars, making this a momentum play for me rather than a swing. A swing would just have a much higher probability of stopping out unless a stop is set incredibly wide based on all the wide-ranging bars lately.
DECK is trying to exit this falling wedge on the top side and I’m interested in participating if it shows some follow through. I’ll take it for a momentum play above $55.25 on Monday if it can clear that level, but a swing stop is still just too wide for my taste.
TSO is looking vulnerable to another breakdown here and I like it for a momentum play on the short side below $56.40. There’s room down to the prior pullback low if so, but the risk/reward is too much of a coin-toss for a swing trade.
HES is at support here and a break below $65.50 could trigger some sell stops for those who are starting to recognize the technical deterioration of the past few months. I like it for a momentum play with a single-day target at the February low.
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.
UA is in a tight wedge here and a breakdown at $58.50 could trigger more selling pressure in the days to come. I will take this one for a swing trade if it breaks that level, and will keep a tight stop just above this base and will look for targets at a pair of April levels on the way down.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
