Good evening StockBandits!
The bulls tucked their tails and ran today after Monday’s failure at resistance (S&P) and subsequent weak finish. As concerns over deteriorating technicals coincided with elevating worry over the Syria situation, the sellers took charge to once again confirm a failed bounce. Strength is still being used for selling into, keeping the correction phase intact.
New pullback lows were seen in the Big 3 (NAZ, S&P, DJIA), and the opening gap lower was only met with about 10 minutes of half-hearted buying before quickly being followed by some additional selling pressure. The selling pressure was kept on the market to produce an intraday downtrend without relent, serving as yet another reason to be extremely cautious on the long side. I’ve expressed that same concern lately and my expectation that the initial bounce would be used for selling, and that’s what has happened. I have no crystal ball, but have paid attention to the price action and it has been apparent that the bulls have lost their edge for now.
With the indexes having just reversed sharply since Monday afternoon, many charts are in correction mode again and that has left my watchlist lopsidedly bearish. Additionally, quite a few would-be bullish charts have been broken (I’ll highlight an example shortly), leaving few names to consider on that side. Chasing shorts after a quick decline like this means wider stops are a necessity due to the distance to Monday’s bounce high as well as the chance for some short-covering or a snapback rally should we happen to open lower on Wednesday. For this reason, the only setups I’m considering for tomorrow’s session are single-day plays as I’m quite content with my current swing exposure.
Let’s get to the charts.
NAZ – The NAZ gapped lower today and continued to sell off right to the 3573 level I’ve been highlighting since July. It managed a tiny bounce from there but looks vulnerable to a break considering the relentless selling today. Should it get broken, next stop is the 3520 gap from mid July. A breakdown would also imply a measured move back down toward 3452, or 121 points lower, which is the height of this multi-week trading range between 3573 and the August high at 3694.
SP500 – The S&P ducked and ran yesterday after getting within 2 points of 1671, then gapped lower and continued down to make a new correction low, undercutting 1639 by 10 points. Next area to watch is a congestion zone from 1612-1615, but there’s not a well-defined level that’s next for this index should the selling continue.
RUT – The RUT erased a week of upside with a single day of weakness today, which is just a reminder that in general we tend to see steady strength with panic usually happening on the downside. It made an incremental lower low, but tonight sits at 1013, which is the August low. A break there and we could quickly see a test of 1008 from the July breakout through the May high. Either way, this index remains in correction mode after today’s confirmation of another lower high.
DJIA – The DJIA managed just a 2-day bounce before turning around Monday and today to make a new pullback low. This index can’t seem to catch a bid, so the next level to watch on the way down is 14551 from June.
VIX – The Volatility Index spiked today to make a new multi-week high. This index is nowhere near historically important levels, the first of which would be 20, a level we’ve only seen cleared on a few sessions this year. The key though is the direction it’s heading, as this implies growing worry/fear and that confirms the price action we’re getting in the S&P.
Notable Names:
AAPL I noted in last week’s Charts on Demand video that a pullback would provide a better long-sided entry for those looking for one. I specifically noted $485, followed by $470 as downside levels to watch. Today this index reached the first area, but given the weakness in the NASDAQ I certainly wouldn’t count out a quick trip down toward $470. Price had simply become extended and this is part of the process of profit-taking and testing prior levels. Be patient with new buys.
GOOG is at the $844-847 area it has respected as both resistance and support this year. However, with lower highs in place, this area may not hold. Here again, patience with new buys is warranted because this isn’t acting like it’s quite done going lower. Buying solid names on weakness isn’t a bad strategy for longer-term holdings, but getting in the face of downside momentum can be painful. It’s best to wait for some stabilization before considering longs, which would actually mean buying after weakness rather than buying into it.
GLD reached a key level today and backed away from it slightly to show respect. The $137.50 area has been both resistance and support since the big gap lower in April, and may represent a logical spot to rest after the recent advance.
EVR is one failed setup of many tonight as it had been working on a bullish base but today fell out of it. I took no position in this stock, as I rarely will place anticipatory buys and would generally prefer to wait for confirmation of the pattern before entering. Nonetheless, it serves as a good example of what a broken pattern can look like with this change of direction and character now that it’s no longer respecting rising support.
HES is not far from breakout territory and today actually posted a small gain. This would have too wide a stop for a swing at the moment but some high-level basing within the channel would create a tighter swing stop should it happen to move laterally here. Should it happen to clear $76.50 on Wednesday, I’ll instead just look to participate in the initial breakout move and aim to be out by the closing bell.
INVN is also sitting near highs and a breakout through $18.05 looks good for a momentum play for Wed. Here again, a swing stop is just too wide given the current base, so this is not an overnight candidate for me. You take what you can get in this kind of a market.
OII is hugging short-term rising support and a break below $79.20 could bring a quick test of $76.70, a level that has served as both resistance and support in recent months. This is a single-day setup for me.
CONN is exhibiting a bit of volatility in the last couple of days but could break support anytime now. If it undercuts $61.70 on Wednesday, I’ll take it for a momentum play on the short side with room toward $50.20. The risk/reward for a swing here just isn’t favorable given the distance to an appropriate stop as compared to next support.
FSLR is already moving lower over the past few sessions so I won’t initiate a swing here since a stop would be so far away. However, it’s coming into a major level here and a breakdown at $36.50 could bring a swift selloff. That interests me for a momentum play on the short side for Wednesday, but this won’t be an overnight hold for me.
New Swing Trade Candidates:
No swing candidates added tonight, sticking with existing positions while waiting for more candidates to surface.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
