Good evening StockBandits!
Last week we saw breakouts in the major averages from their 3-week trading ranges with new multi-year and in some cases all-time highs made (DJIA, S&P 500, RUT). The NAZ saw a big burst higher, while the others eased past short-term resistance to test the waters a bit on the upside. It was a unanimous breakout, but the degree to which we saw strength varied. It leaves traders wondering…is this really a breakout, or isn’t it?
The bulls now another technical edge here to exploit. Not only have they maintained the gains from the late-June low by holding higher in recent weeks, but now there’s blue sky above. That means a lack of technical overhead to restrict momentum, but they’ll still need to put cash to work in order to take advantage of the opportunity. A lackluster move higher followed by any meaningful selling could quickly become a failed breakout and turn the short-term tide. For the most part lately, anything but the long side has been the wrong side.
The basing action of the past few weeks has been constructive though, allowing not only extended indexes to pause but individual names as well. That has produced many high channels and bull flag-type patterns from which new plays can be made. Earnings season is still affecting my activity as there are still many names reporting, but we’re on the back end of earnings season and that should free up more trading opportunities in the weeks to come.
Let’s get to the charts.
NAZ – The NAZ exhibited the most strength last week with a hesitation breakout Wednesday followed by a big day Thursday and some follow through on Friday. It has plenty of room to breathe now, with the gap to 3626 being the next downside level to watch. Just beneath that is the prior high just 2 points lower at 3624.
SP500 – The S&P cleared the 1700 level last week, but still isn’t far from it. Volume wasn’t overly impressive either, which means the bulls still have some work to do if they intend to build on this breakout in a more convincing fashion. This is a new all-time high and that should not be discounted, but the breakout needs to stick.
RUT – The RUT avoided the rounded top that still looked to be in play even mid-week last week and pushed north to reach a new all-time high. Here again though, this is only an incremental breakout and therefore the bulls still have some proving to do if it’s going to stick.
DJIA – The DJIA has spent the bulk of the past 3 weeks in a 200-point range between 15400 and 15600. On Thursday and Friday, it closed above 15600 but still is only a few points from it. Volume was light, making this breakout a bit suspect until greater acceleration in price or stronger volume is seen to accompany the start of this new advance.
Notable Names:
GS is pressuring upper resistance and could break out any day now. This would likely influence several other financial names which are in consolidation patterns near highs, and could in turn benefit the S&P with its financial exposure.
SSYS is nearing the apex of this wedge and should resolve this indecision shortly. It may be on hold for earnings, which are due out on Thursday this week.
XONE is also wedging here but I’d like to see volume perk up a bit more and price get closer to the upper trend line before setting up a trade. It belongs at the top of the watch list though, as these compression patterns can often lead to explosive moves.
SCTY is looking ripe for a breakout from this wedge, and I like the pattern enough for a swing if earnings weren’t scheduled for Wednesday of this week. It looks good for a momentum play above $42.25 for Monday.
ACAD is at upper resistance and looks ready for a breakout, but earnings are scheduled for Tuesday so I won’t be taking this one for an overnight swing either. I do like it for a momentum play if it can clear $20.85 on Monday.
GIMO is trying to pause here but may not rest for long given all the recent strength. With the lack of a real base, I won’t take it for a swing, and instead will just go for the momentum play on Monday if it clears $37.
SCSS is building a bearish wedge here within a downtrend and may resolve lower very soon. I like it for a momentum play short if it breaks $22.50 on Monday, but would prefer to see this base tighten a bit more before considering it for a swing.
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.
BPOP is in a well-defined uptrend and has been resting here not far from highs in a symmetrical triangle pattern. I’ll get long for a swing upon a break of the upper trend line at $33.65, and there’s plenty of time for this one to work since it has already reported earnings for the most recent quarter.
STX sold off hard recently and can’t seem to bounce. Instead, it has simply based laterally in recent days. A break of the small rising support at $40.60 will trigger a short sale for me as a swing as more selling kicks in. I’ll have a protective buy stop just above the short-term bounce high. It has already reported earnings for the most recent quarter as well.
WDC is in the same industry and has a bit of a similar pattern to STX. This stock sold off hard, bounced to fill some of the gap, and in the process created some rising support. A break of that support at $64.50 will trigger a short sale for me as a swing as price turns back down in search of buyers. I like the risk/reward on this setup, and it also has time until the next earnings report.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
