Good evening StockBandits!
The indexes separated from each other last week with small-caps and techs holding up rather well while blue chips and financials pulled back. Traders have been waiting for signs of a reunion ever since, but so far the mixed messages have continued.
A bounce on Thursday finished off the session high, then saw no follow through on Friday. By the end of the week, the S&P 500 had painted its 6th red bar out of the last 7. The post-FOMC breakout from the prior week was quickly given up and the bulls in the senior indexes seem to have a bit of buyer’s remorse. It’ll be interesting to see if they can overcome it or if instead the slide continues to retrace the move off the August low.
Meanwhile, there’s the NAZ and RUT, which have moved laterally in recent sessions but remain very near their highs. It’s clear to see that it wouldn’t take much of a bid to propel those averages to new highs, so we have a bit of a standoff between the feeble-looking blue chips and the more speculative names which are standing their ground for now.
A look at my watchlists over the weekend revealed a number of pullback candidates with many stocks still in uptrends but in short-term declines. The catalyst for long-sided entries in those will be some sort of a turn higher or return of strength to clear descending trend lines, but the wait continues for now. The debt ceiling has moved to center stage alongside taper talk, giving traders fewer reasons to put cash to work until some of the dust settles and the headlines become a bit less spooky. There’s something about the phrase “government shutdown” that doesn’t give traders the warm fuzzies. Go figure!
Let’s get to the charts.
NAZ – The NAZ added about 7 points on the week last week as it continued to respect 3798. This base-above-base look is certainly bullish, and there’s some additional room for the projection to 3814 out of the July/August trading range (roughly 120pts measured move from 3694 breakout), but the bulls are still waiting for the right motivation to make it happen. At the very least this pause has been healthy to work off the overbought conditions we saw a week ago.
SP500 – The S&P is channeling lower here in the short term as it retraces some of the 102-point rally off the August low. The failed breakout through 1709 doesn’t help the bull case here, and neither does the persistent weakness of late. However, a breakout on the NAZ could certainly see a sympathy rally in this index. Next support is 1671 if we continue to slide.
RUT – The RUT keeps finishing in a tight range and is sitting just shy of its all-time high set intraday last week at 1082. This rest is healthy after the nonstop lift from the August low, but if continuation is going to happen sooner than later this index will need to hold the 1063 breakout, otherwise it’s likely in for a pullback. Even in the latter scenario this index has ample room to pull back and still create another higher low, so the bulls remain in good shape.
DJIA – The DJIA tried to break out two weeks ago and abruptly failed. Since then it’s been persistently weak with even last Thursday’s bounce finishing well off the session high. Friday’s session marked a new pullback low. Some stabilization here could carve out a higher low, but the bulls likely have a little emotional baggage in the short term after the breakout failure.
Notable Names:
FB has been the picture of strength lately and has actually accelerated the pace as it has moved higher. Just Friday it moved its streak of sessions without a lower low to 9 as it made new all-time highs. This one is very difficult to chase on the long side here after so much strength, but equally difficult to short because it has yet to weaken. The rising trend line is the area to watch, as a break below it may finally generate some selling.
GS was facing a breakout a couple of weeks ago, as were some other financials, but since then this one and the others have rolled over. It filled a gap on Friday and now sits near the middle of its range again. The failure to clear resistance kept price contained, and made the path of least resistance down. The wait here continues.
YELP is near a small trend line and a turn up through $69.35 could spark some short-term buying. I like this setup for a quick play on the long side, but not enough for a swing given the broad market conditions at the moment.
TRLA is at a descending trend line here and a turn up could open the door for some short-term strength. This looks good for a single-day play on the long side if it can clear $48.50 on Monday.
QIHU is turning lower out of its ascending triangle pattern and the weak close on Friday may spell continuation. If it breaks $83.40 on Monday, it looks good for a momentum play on the short side.
QCOR is still hugging short-term rising support here as the bounce attempt remains in effect. So far, it has been feeble and has only recovered a small portion of the last 2-day decline from mid-September. A turn lower through $56.40 sets up a single-day short sale here for Monday as it heads toward the $52 area to possibly fill the gap from late July.
AEGR is holding rising support for now but it wouldn’t take much to break it. A turn lower could see shares weaken quickly, so I like this for a single-day play on the short side for Monday if it undercuts $82.90. This is not the tightest of setups and I’m very selective with drug stocks for swings, so I won’t be holding this one overnight.
New Swing Trade Candidates:
No new swing candidates tonight, sticking with the existing list while waiting for better risk/reward plays on a multi-day basis.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
