Good evening StockBandits!
The indexes kicked off the new week by working their way steadily higher into mid-day, when a little bit of a breather set in. As the final hour of trading got underway, however, a quick burst of selling erased the morning progress with traders responding to Secretary of State John Kerry’s remarks on Syria. War tends to raise uncertainty, and traders have a habit of selling first and asking questions later. We did see a minor recovery into the bell, but it was typical of the knee-jerk type of reaction that headlines can cause in the market.
Interestingly, the S&P had rallied right up toward 1671, stopped just 2 points shy of it, and turned lower. The NAZ also had filled its gap to 3669, and also turned lower. Seeing these technical events and levels correspond with a market reaction to news is always something I enjoy. The talking heads on TV might place all the emphasis on the headlines, but it’s always important to respect the technicals because traders have a memory reflected in price. It’s amazing how frequently we see this kind of a “coincidence.”
So tonight, it’s looking like the bounce off last week’s low could be fizzling out. I had expected to see the initial bounce get met with some selling to create some lower highs, but I was surprised in digging through the charts how messy most of them are in that regard. There are very few clean setups that are looking shortable here after this bounce, and among those that are, I’m not liking them for swings due to either wide stops they require or risk/reward scenarios I simply don’t find favorable. As such, I’m looking at some single-day momentum plays heading into Tuesday and will keep my timeframe very brief until better plays surface. There’s still a short candidate on the swing list which has yet to trigger (CREE), I’m just not adding any other names to the list tonight.
Let’s get to the charts.
NAZ – The NAZ filled the gap to 3669 today, got within 10 points of the high, then sold off 27 points. This was not an encouraging bar for the bulls who now have a short-term lower high in place after reaching the upper end of the range. They better step up quick if they want to avoid a deeper retreat back toward 3573.
SP500 – The S&P got within 2 points of 1671 then promptly sold off 13 points from its session high to end at the low. This is what technical rejection looks like, and the next level to watch should we get more selling from here is 1639 at the August low.
RUT – The RUT filled much of the gap to 1047 then gave up almost 1% into the closing bell from its session high. Today it was able to finish incrementally higher, but the weak close points to some fatigue and makes this bounce look like standard backing and filling. 1036 is the level to watch now, as a break back below it would look like a failure and invite 1013 and 1008 into the picture.
DJIA – The DJIA finished at its low today after just a 2 day bounce and now is less than 60 points away from the key level it has respected in April, June, July and August at the 14887 area. A breakdown there will invite more selling.
Notable Names:
SIX is an example of a stock that’s bearish and which I expect to produce lower prices, but a bit of a sloppy chart makes it extremely difficult to structure a play. I am seeing quite a few of these tonight, although another bar or two could make a huge difference in cleaning up some patterns and bases to allow for more swing setups.
INFI finished strong today and in dull markets traders often flock to momentum names. This is not an ideal swing setup given the volatility in this stock, but some follow through on Tuesday with a push through $20 and I’ll take it for a single-day momentum play. It has some room to pop, I just don’t have high expectations of it lasting and this type of stock simply requires closer management than the set-it-and-forget-it type of swings I typically prefer.
AU is at the upper trend line of this small base and a push past $14.75 could set it free for a quick lift. I like this for a momentum play, but as a swing the risk/reward just isn’t very compelling.
HDS is nearing the upper end of this wide trading range and could see a breakout soon. A swing stop would be too wide for my preference, so instead I’ll just aim to participate in the initial breakout move if it can clear $24.30 on Tuesday.
LULU just put together a multi-day bounce but volume has diminished along the way and today this stock finished well off its high. A break below rising support at $71.20 and I’ll grab it for a quick short on Tuesday, as some normal profit-taking seems due and could be worth a momentum trade.
ROVI is at rising support tonight and a break below $18.65 could bring a quick return to test the low from a few weeks ago. Here again, the risk/reward for a swing isn’t attractive so I’ll just look to manage this via the intraday chart the way I do with these single-day momentum plays.
AXP is struggling to lift from support and keeps knocking on the door. A break below $73 and we could see a quick burst of selling, so I’ll look to get short Tuesday if that level gets broken to just participate in the initial move lower.
New Swing Trade Candidates:
No new swings tonight to add to the list.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
