Good evening StockBandits!
After alternating advances and declines for the past six sessions, today we saw some follow through on the downside as the major averages gave up more than 1% each. Stocks opened underwater, attempted to bounce slightly, then rolled over for a steady intraday downtrend into early afternoon. A 90-minute bounce was ultimately met with enough selling to mark a new low on the session by mid-afternoon, followed by some late-day chop into the bell.
Today’s session was an important one, not only psychologically to see the downside follow through, but technically as well. The declines we saw confirmed trading range breakdowns in each of the 4 indexes I follow the closest, and it puts the bulls a bit on the defensive for the time being. We have a big jobs number on Friday, and should we happen to see weakness into that number, it may set up a short-term bounce scenario. For now, however, capital preservation is most important and there’s no room for hero trades as we face the deepest pullback we’ve seen in 6 1/2 months.
On the swing trading front, I was stopped out of my only position today to put me back in cash tonight. The recent trading ranges and lack of follow through have allowed many stocks to rest, although not in a tightening fashion. That has left many with well-defined levels for potential trades, yet adequate stops on nearly each of them have been quite wide. As a result, I’ve highlighted a number of momentum-type plays for cash flow while waiting for better opportunities to increase overnight exposure.
Let’s get to the charts.
NAZ – The NAZ has seen every single advance since May 15 immediately followed by a decline in the very next session. This points to cash getting raised and a lack of resolve on the part of the bulls in recent weeks. I still would not at all be surprised to see the unfilled gap (3370 down to 3340) get tested on the current dip.
SP500 – The S&P gave up 1635 for the second time in three sessions yesterday, and then today confirmed it in a big way with a 22-point slide. It’s now approaching the primary uptrend line, which coincides with April resistance (which may serve as support) at 1597.
RUT – The RUT closed beneath 970 today, which constitutes a trading range break for this small-cap index. Next level on the downside as potential support is the 954 level where this index broke out early last month.
DJIA – The DJIA is again making triple-digit moves with regularity with today being the 5th one in the last 7 sessions. This index closed beneath 15,000 tonight, and has roughly 75 points of room on the downside before April resistance would be met as potential support.
Notable Names:
APA has been acting well and today made a multi-day high to challenge the prior high from January, only to get rejected. In a weak market environment, even strong stocks struggle to make headway.
KBH is beneath its 1-year uptrend line after roughly a 20% selloff in recent weeks. The stock is starting to look a bit stretched here on the downside, although the recent weakness points to a change of character and therefore the next bounce is likely to provide a better shorting opportunity than to chase the current move.
AEGR is perking up again, oblivious to the broad market. This is how momentum acts, and when very few stocks are holding up well many momentum traders flock to the same names. This one looks poised for another pop above $74.10 as a momentum play.
WFT just held support and now could see a bounce if it’s able to clear the trend line at $13.85. The risk/reward isn’t real enticing for a swing, however, making this a single-day play for me if it goes.
NTAP is seeing no follow through lately so I’m not interested in a swing, but if it clears the trend line at $37.90 it could see a quick pop good enough for a momentum play.
NFLX is facing trend line resistance here and a push through $229 could give this stock a quick lift.
New Swing Trade Candidates:
No new swing candidates tonight due to lack of tight setups with favorable risk/reward profiles. I am in cash tonight waiting for new entries.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
