Good evening StockBandits!
The indexes added to their gains from last Monday’s low today, kicking off the month of July and the 2nd half of the year with a solid gain. A gap higher set the early tone, and some holiday-week buying soon followed. That took the NAZ and RUT both high enough to fill the gaps from the close on 6/19. This backing-and-filling type of price action is actually healthy to see, and it’s giving some nice 2-way price action for active traders.
But…it’s not all roses yet for the bulls. I see issues with several aspects of the price action, which is evident on the charts. Here they are:
1. Lower highs. Since peaking in May, we already saw a mid-June lower high established for each index and now there’s still the potential for a 2nd lower high on the current bounce.
2. The lackluster upside volume that has accompanied this bounce. Yes, it has come with some gaps (which I’ll also address momentarily) and we’re currently in one of the lightest 2 volume weeks of the year. That may be a reason, but it doesn’t dismiss the technical look of a V-shaped bounce on diminishing volume.
3. Weak finishes. Despite the multi-day bounce, we have repeatedly seen late-day stumbles. This suggests a lack of conviction (similar to the light upside volume) on the part of the buyers.
4. Unfilled gaps to the downside which could be the next order of business for this market. We’ve seen upside openings in 4 of the last 5 sessions, which is to say there’s room for a retreat to at least fill in some of those gaps.
5. Short-term overbought. We’re now a bit stretched on the upside after a quick 5-day ramp, and this looks like a bounce to sell into.
The overall picture right now remains one of a correction stage for the broad market. It’s not a relentless one-way selloff at this point, so there are going to be some spots to get involved for those who can time it well. But with lower highs in place and the characteristics outlined above, this looks like a nice opportunity to raise cash for those who failed to do so over the past 6-7 weeks.
Let’s get to the charts.
NAZ – The NAZ finished just 4 points higher than where it opened today, and 20 points off its session high. If that isn’t a lackluster finish, I don’t know what is. Nonetheless, it gained about 1% on the day for its 5th straight advance. I still don’t trust this bounce as it has nearly all come by way of gaps (as I noted here last night). Today’s lift served to fill the gap from the June 19 close, and now there are some downside gaps left unfilled.
SP500 – The S&P almost filled the gap from the June 19 close and then backed off 12 points from its session high. This took place on light volume, and I would not expect that to improve this week given the early close on Wednesday and the market being closed all day on Thursday.
RUT – The RUT filled its gap to the June 19 close today and was able to finish stronger than the other indexes. Nonetheless, it’s still got a chance for a lower high here, especially considering it’s up 5% from the low of last Monday.
DJIA – The DJIA gave up 109 from its session high into the close today and looks to have run out of steam here on the rebound. This index looks to have a fair shot at another lower high here as well.
Notable Names:
APC is like many other stocks in that it has rallied right back to recent resistance and is now starting to back off. The trouble with implementing a play here is determining an entry. There’s room for a drift lower, possibly a gap fill from last Tuesday’s open, although I’m not overly impressed with the setup. It’s a good example of what I’m seeing a lot of right now, which is a lack of commitment after a bounce.
CMG is hugging rising support and could see a resolution to this wedge any day now. This is highly capital-intensive given its price, but is optionable. Recent lower highs point to some selling, but higher lows have also held.
CSOD is still building this bull flag and may need more time. However, if it clears the upper trend line Tuesday at $45 I like it for a momentum play. As a swing, I don’t prefer the lack of strong volume today and am looking to be highly selective this week given the reduced trading hours (3.5 days total) and the very light volume we’re likely to get.
MELI still looks good and today saw very light upside volume with the bounce effort. A turn below $107 and I like it for a momentum short for Tuesday.
WYNN is looking fatigued here and a multi-day low at $127.50 sets up a momentum play for Tuesday to potentially test the low of last week or at least fill the gap to Monday’s close.
IOC was listed here last night but made only minimal progress today. I like it for a 2nd chance momentum play for Tuesday and would like to see it break today’s low to exhibit some follow through.
AGU is sitting just above rising support but below former support which is now resistance in the $88.40 area. A break of the rising line at $86.50 and I like it for a momentum short on Tuesday. I wouldn’t expect a test of last week’s low, although that isn’t out of the question. This looks like a bounce that could easily fail and a break of the trend line would set that in motion. Here again, the setup isn’t ideal for a swing as it could be tighter and I’m looking to maintain a high standard for this holiday week.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for better risk/reward setups.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
