Good evening StockBandits!
The main event today was the scheduled release of the FOMC minutes from the last meeting, and ironically, it produced much greater price volatility than many recent Fed days when the actual policy statement is read. The initial knee-jerk response was weakness followed by a sharp upside reversal, and then one more selloff just to keep things confusing. Fittingly, we ended the day just a short distance below where we were pre-FOMC minutes.
The highly fickle afternoon price action reminded me of a saying about weather here in the central plains at certain times of the year: if you don’t like it, just wait a few minutes because it’ll change. Zooming out just a bit on the charts from the intraday to the daily, the situation we’re in is simply that of a market trying to put together a short-term relief bounce with little success so far. It’s difficult to expect decisive price action after meaningful breakdowns last week and essentially the churn we’ve witnessed so far since then. Shaky bounces and moves which struggle to last are to be expected while we see if the charts can reset for a few days. Both the DJIA and S&P made new pullback lows today, keeping the bulls on their heels for now.
Technically, we’re still beneath key levels and that’s the most important condition here. Bounces should be viewed as suspect and prone to failure until we see improvement on the part of the bulls. That would have to start with the reclaiming of former support zones, and we’ve yet to see that happen.
One last note tonight is that tomorrow I’ll have the Charts on Demand video where I take a look at some of your stocks. If there are a couple you’d like to see reviewed, be sure to send them my way either via email or by using the button on the right sidebar within the member area.
Let’s get to the charts.
NAZ – The NAZ again failed to reclaim 3624 today after yet another test of the area. The gap lower from a week ago remains in effect (still no fill) and next support for this index is the 3573 level from late July. Should that get taken out, the gap to 3520 would be the next technical area to which this index could gravitate.
SP500 – The S&P has made a habit of weak finishes in recent days and today was no exception. The late-day selloff took this index to its lowest close since July 8. The July retracement continues for now with no well-defined support approaching. That means a bounce will more than likely result from oversold conditions rather than a prior level.
RUT – The RUT stopped shy of 1036 today and finished lower on the session. That’s the upside level to watch, whereas 1008 is the downside level to watch from the July breakout through the May high.
DJIA – The DJIA is back to the 14887 area as of tonight, which is the level I’ve been pointing to as the next potential area the bulls will be looking to in hopes of a bounce. Time will tell if we get one, but once again this index is looking a bit stretched for the current decline.
Notable Names:
XOM is a chart I wanted to highlight tonight. In any casino, the roulette wheel has an electronic sign showing previous rolls. Gamblers by and large see streaks and try to fade the streak, but even after 20 straight reds the odds for black (or green) on the next spin remain the same. Traders see streaks and similarly attempt to fade them, simply because stocks get overbought or oversold and eventually will see some relief. However, while streaks are intact, it’s best to respect them. XOM recently had 11 straight declines before a measly 1-day bounce, and since then has put together another 9 declines (new streak!). This stock is in correction mode, and buying in hopes of a snapback could mean enduring more downside before a relatively meaningless bounce finally arrives. It might pay off, but fading streaks is not a strategy worth pursuing. Wait for a bullish reason to get long rather than the casino mindset that maybe the next bar will be a different color. Managing risk will be far simpler.
TSLA is still in an uptrend but tonight there’s a short-term lower high in place that warrants some attention for those long the stock. At a minimum, this is worth taking note of and perhaps lightening up on longs in case the lower high scenario holds. Some basing action would be healthy at this stage in the rally.
EVR is building an ascending triangle and continues to base nicely. This triangle needs to tighten in the days and possibly weeks to come, so for now I’m simply keeping it on my radar. I’d like to see it tighten to build up pressure for a stronger move out of the base, as well as a tighter natural stop loss at the lower rising trend line.
BZH is attempting to turn up here after a quiet bounce and a push through the trend line at $17.50 could generate some quick interest. I’ll take it for a momentum play on Thursday or Friday if that level is crossed, but as a swing it’s just not a compelling setup due to a very wide stop and poor risk/reward. For that reason, I won’t be taking it overnight and will instead manage it via the intraday chart.
MGM is also exhibiting some relative strength here compared to the broad market and a breakout could come any day. Today it saw increased volume, so perhaps it’s going to attempt a push higher. I like it for a momentum play above $17.75 for Thursday or Friday, but it will only be a single-day play for me again due to the width of a stop and the sluggish pace at which it typically moves. With the market in short-term correction mode, a slow-moving long is just not a very compelling type of play to set up.
MNST is sitting in a little bear flag pattern here and a turn lower through $58.75 could spark another quick round of selling. This stock has been reversal-prone in recent months, making it difficult to manage a swing with hard targets. As such, I like it for a momentum play for Thursday or Friday if it breaks that level to participate in the initial move out of this small base.
EQIX is sitting on rising support and looks good for a breakdown play. This will be an intraday play for me if it goes, as it’s just a bit more capital-intensive than my preference for a swing.
New Swing Trade Candidates:
No new swing candidates tonight, waiting for better risk/reward setups to emerge and sticking with existing positions for tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
