Good evening StockBandits!
It’s good to be back after a vacation last week, and thanks to those of you who sent well-wishes in support of some time off for me. It’s a good thing to get to step away periodically, and while I had hoped it would coincide with a market rest, I enjoyed it nonetheless. I’m still working through my inbox, so if you emailed and haven’t heard back, I will get to you!
As for the market, it kept it on cruise control last week with the rebound from the June low continuing. That took the RUT to brand new all-time highs, while the blue-chip DJIA and S&P 500 each now sit just a short distance from their all-time highs. The NAZ has been no slouch, and tonight it sits at its best levels in almost 13 years (fall 2000).
This rally has been suspect in my opinion, but price keeps working higher and that shouldn’t be ignored. There have been some seasonal factors impacting the lack of volume such as it being mid-summer with many traders taking vacation, the usual July 4th light holiday volume, pre-earnings season uncertainty, and the May highs serving as some technical overhead being the primary ones. Nonetheless, the buying has continued and shorts have paid the price for arguing with the tape.
At the moment, we’re extremely stretched and long overdue for some profit-taking. That isn’t to say I expect we’ll reverse straight back down and enter a deep correction, but simply that I don’t expect or believe that prices will keep lifting day after day endlessly. The QQQ just painted its 13th consecutive daily gain on Friday, and the RUT is up over 10% off the low from just 3 weeks ago. That pace isn’t sustainable, so a rest or a dip at this stage would be quite healthy to see.
One reminder tonight is that earnings season is kicking in once again and it’s of utmost importance to know when companies report in order to avoid holding overnight on those days so that I’m not surprised by the type of major gap which is so common during earnings season. There are a number of earnings calendars available, but I use EarningsWhispers and Yahoo! Finance primarily. They’re great sites to bookmark as quarterly reports start rolling in.
Let’s get to the charts.
NAZ – The NAZ has rallied 7 straight sessions and 12 of the last 13. The NAZ 100 ETF, QQQ, has been up 13 consecutive sessions! This index has also tacked on over 9% just since the June low, which means it’s extremely extended here and due for a rest. That has yet to begin, however, so all we can do here is proceed with caution until some basing action or profit-taking finally arrives. Once it does, many more setups should come with it, but tonight there just isn’t much to choose from in the way of new setups.
SP500 – The S&P is approaching the previous high at 1687, and price is also short-term extended here. That sets up a nice scenario for some rest, although there’s no guarantee we’ll get it. Volume has been questionable, but price has remained strong, keeping things a bit tricky for anyone interested in managing risk.
RUT – The RUT is overcooked here, having added 10.1% in just 3 weeks. The pace isn’t sustainable, but rest has yet to kick in. For now, it’s a reminder to be careful chasing moves which appear long in the tooth, as a pause or a pullback would offer better exit criteria in case of poor timing.
DJIA – The DJIA is coming up toward its high of 15542 set back in May. This index just gained almost 950 points, so it’s been quite a run here as well. A pause at this stage would be technically healthy, as a breakout which occurs under extended conditions is simply more prone to failure once natural profit-taking kicks in.
Notable Names:
NFLX was highlighted here a week ago with a pair of trend lines and last week it cleared the upper trend line at $229. It has run some $28 higher, and is not in a spot for new entries. However, it’ll be one to keep on the radar as some pauses along the way could easily set up additional entries.
TSLA has accelerated (no pun intended) its uptrend in the past few weeks and shows no signs of slowing down. This stock remains strong and not one I’d short, but the difficulty here is in finding an entry to get involved. Despite the look of continued strength, I’ll wait for a base to form before considering it for a play.
LNKD is still working its way higher since the June 24th higher low, and now price is nearing the prior high. This stock also looks strong, but once again a rest before a breakout would create a better technical picture than a big price advance into a breakout, as natural profit-taking could easily result in a failed breakout.
TVL is trying to rest here but has shown some nice momentum lately and may not be able to pause much longer. Should it clear $17.90 on Monday, I like it for a momentum play here. If instead it can base further, I may revisit it soon for a swing but it’s just not ready for that yet in my opinion as the base needs to mature further.
BYD has moved laterally since clearing the upper channel trend line two weeks ago. A turn higher through $12.20 sets it free for a quick pop, so I like it for a momentum play if that level gets crossed on Monday. However, the risk/reward for a swing isn’t ideal here so it’s not an overnight candidate for me.
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.
CME is pressuring the upper trend line of this triangle and a breakout at $77.60 could set it free for a run higher. I will get long there for a swing and will look to be out prior to earnings, which are due out in two weeks. For this reason, I’ll look to aggressively raise my stop along the way. I like the risk/reward here as a natural downside exit is just beneath the triangle should this pattern happen to trigger a buy and then reverse lower (fail).
NAV broke the $30 area in June after respecting it several times as support. Price has rallied back up but has been unable to reclaim it. I like it as a short against that level, so I’ll look to short it for a swing if it breaks $29 and will set a stop above $30 in case it reverses higher. Earnings are due out in early September so there’s ample time for a retreat in price to potentially test a couple of recent levels on the downside.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
