Good evening StockBandits!
The market lifted at least a little in every session last week, but as I noted here last night, it just wasn’t happening in a convincing fashion with the weak finishes on 3 of the 4 days. Today, the strength continued, but in a different way. We opened strong and added to the gains throughout the session, with the NAZ making a new high in the process. The S&P reclaimed 1671 and the RUT pushed well past 1036, and even the DJIA cleared its previous minor bounce high.
This is what it looks like to climb the wall of worry. When the headlines raise concerns as they have lately with Fed tapering, the debt ceiling, and Syria, sellers become active. Those sellers include bulls wanting to lighten up, as well as bears establishing short positions. However, when the market catches a bid (for whatever reason, whether an absence of strikes in Syria or Chinese data or anything else), all those sellers tend to want to unwind their sales. The result can be a climbing market in the face of predominantly negative news or expectations, and it can be impressive. Today was one of those days given the persistent strength we saw on an absence of actual negative events.
As we examine the charts, it’s important not to get carried away. Yes, today was a strong day and we’re back above some of those levels I pointed to last night. That means a little less technical overhead at the moment. But there’s not an abundance of breathing room here and some natural profit-taking or the return of spooky headlines/events could bring about a quick retreat. In what has been largely a trading range environment in recent weeks, it’s wise to account for the potential for a short-term pullback and that makes aggressive buying at this stage a bit higher risk, generally speaking. There are some nice setups which warrant a bullish stance, but the rhythm of the price action has been back and forth and we shouldn’t forget that after seeing advances in 7 of the past 8 sessions.
Let’s get to the charts.
NAZ – The NAZ broke out today and now the consideration is whether or not this will project a 120-point rally as a measured move (height of the trading range from 3573 – 3694). If so, that would bring this index to 3814, although having rallied 7 of the last 8 sessions a rest isn’t out of the question. What bulls want to avoid is a quick fallback beneath the breakout zone, as that would be a failure and could spark more selling.
SP500 – The S&P is back to 1671 tonight, testing the level we’ve seen hold as both support and resistance since July. Above this is the unfilled gap to 1685, but even given the 7-for-8 advance here this index is still lagging the NAZ in relative strength.
RUT – The RUT put up an impressive day today by clearing 1036 and the prior bounce high at 1044. Next up is the unfilled gap to 1047, just a single point higher, followed by mid-July resistance at 1056. Some profit-taking after this quick 4% gain would be healthy though.
DJIA – The DJIA made a short-term higher high today and now has some room to rally back up toward broken support from mid August. There’s about 300 points of breathing room to short-term support, which could help the bulls a little bit.
Notable Names:
XLE is back to test an important level at $84 tonight, making this a sector to keep an eye on with the middle east in focus.
DLTR is working toward the upper end of its range but isn’t threatening a breakout yet. This could be one to watch in the coming days however, so we’ll see if it can get closer to $55 key resistance where it has been turned away numerous times since early July.
STX stopped me out today of my swing having only hit target 1. I had been using the downtrend line as a trailing stop but that got broken today. For trades in motion, these trend lines can be utilized as stops since they mark the pace of the move and an interruption often spells a character change.
SREV is perking up here within an ascending triangle and a breakout could deliver a quick pop as interest increases in this name. I like it for a quick play on Tuesday to participate in the initial move higher if it can clear $13.30.
AFOP is nearing the apex of this wedge or triangle and could get going again soon. This has been a real mover lately so it could generate a big pop. I like it for a momentum play on the long side if it can clear $38.75 on Tuesday.
TGI has paused after a minor bounce and a break of rising support at $73.40 could trigger more selling. This looks good for a single-day play on Tuesday if that rising trend line is undercut.
AOL is already beneath a key level and could complete a gap fill from February if it breaks multi-day support at $32.50. I like this for a momentum play for Tuesday but the risk/reward for a swing isn’t compelling.
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.
FANG is sitting in a cup and handle pattern and the height of the cup is the typical projection out of a pattern like this. That could produce a sizeable move, so I’m looking to get long if this one breaks out at $44.50. I’ll have a stop beneath the handle just in case of a reversal. I wouldn’t mind if the handle gets a bit more basing activity ahead of a breakout.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
