Good evening StockBandits!
Last week we saw another market advance as the recovery off the August lows continued with a breakout in the NAZ to new levels not seen since 2000. Early strength in the week was followed by some quiet basing action Wednesday through Friday, allowing stocks to rest just a bit on the heels of the latest advance. The NAZ is at highs, the RUT and DJIA are respecting key levels, and the S&P is just a short distance from its August peak.
We’ve been seeing real steady buying in recent weeks to indicate that the bulls are back, but perhaps less obvious of late is the importance of the market holding onto these gains. To see a rest phase kick in (even if it’s so far only a few days) without a big pullback shows the absence of fear and the renewed confidence of the bulls.
As we move forward, there’s plenty for this market to deal with. Syria will remain a hot topic, this week we have a highly-anticipated FOMC meeting and possible taper talk, and the debt ceiling discussion may soon follow into October. Those are just the known items right now, so it certainly should stay interesting to say the least.
What we’ll need to keep an eye on are not only the levels, but also the character of the price action (strong/weak closes, elevated volatility, volume clues, etc.). In addition, it’s critical to maintain high standards when it comes to new plays. Many stocks remain extended here and need some additional rest, so it’s important to only commit capital when a well-defined plan is in place and the proper relationship between risk and reward are present.
Let’s get to the charts.
NAZ – The NAZ made a new high by clearing 3694, saw some follow through, and then rested the final three sessions of the week. This bodes well for continuation higher, and there’s potential for a measured move to 3814 by adding the channel height to the breakout level. Last week also saw price closing at or near the high in 4 out of 5 sessions, which was a change from the previous week where there was a lack of conviction even on advancing days.
SP500 – The S&P is trying to base here with a miniature bull pennant after a big ramp off the recent pullback low. It has reclaimed 1671 and filled a gap last week to 1685 and now sits just over 1% from the all-time high of 1709. Should this pennant get resolved to the upside, a test of the high could be seen shortly. Every day of rest here counts.
RUT – The RUT saw a huge rally off the key 1008 area to return to 1056, another level it has respected multiple times including this summer. That said, it’s not far from a breakout and new all-time highs could be painted soon on this daily chart. Any and all rest is welcomed at this stage but the past 3 sessions have certainly helped to digest the recent lift.
DJIA – The DJIA saw a huge advance last week to get within spitting distance of the 15400 level it broke down from in August. This index now needs some rest after this steep rally, and this would be a logical spot to do so.
Notable Names:
AMZN is starting to roll over a bit here and possibly carve out a lower high. This hasn’t been much of a leader for the NAZ, but it would actually be a drag on it if the downside picks up steam here with room to retreat back toward $280.
F isn’t far from a breakout to new highs at $17.70 and has twice recently respected that area. If price could move laterally here like it’s trying to do, a powerful flag could be built just beneath key resistance. An upside resolution would have a better shot at sticking in that scenario.
VALE is still in recovery mode after creating some higher lows the last couple of months. Here price has pulled back for a few days but has seen no nasty change of character, so I think this dip is worth watching. Should price stabilize soon, this could provide another pivot for a play on the long side.
ACAD is sitting near highs and is in a small base it formed last week. It has a history of single-day breakouts through lateral resistance so that’s all I’m looking for here. I like it for a momentum play above $23.60 for Monday if that level is cleared.
KONG just pulled back following some excellent upside momentum and now price is trying to turn back up, as is volume. A small trend line is just overhead and that could be used as a pivot here for higher prices. I like this one for a single-day play on the long side if it can clear $13.70.
ISIS is holding up well here after a minor dip and some rest. A turn higher through $31.65 could generate more interest given the recent strength, so I like it for a momentum play for Monday if that occurs. I’m selective with drug stocks and this one doesn’t have a lot of room before the highs would be met, so I’m just not interested in a swing here.
CONN is showing plenty of weakness not only with the big drop off the recent high but the bounce last week which quickly failed. A break of rising support at $52.50 opens the door for more downside so I’ll take it for a single-day momentum play on Monday if that occurs. A swing stop is too far away so I won’t be taking this one overnight as I’m just not willing to give it that much room.
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.
DLTR has been on my radar for a couple of weeks and now price is facing a breakout. I’ll be a buyer for a swing trade if this one clears $55.15 to make a new high, and will use rising support as my initial stop.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
