Good evening StockBandits!
The indexes gapped higher this morning in an apparent catch-up move to overseas markets after being closed yesterday. The opening gap represented a 1% pop for the NAZ, but only incremental new highs were made into mid-day. From there, we saw some profit-taking kick in which resulted in a partial gap fill, although the market was able to hold onto enough of its gains to finish green across the board.
We’ve now seen three decent-sized gaps to the upside in January, and none of them so far have produced any meaningful same-day follow through. We’ve yet to see a real exhaustion gap type of reversal where the sellers pile in, but it’s safe to say that traders have exercised caution at the very least at the sight of these strong opens.
Given that today’s optimism wasn’t built upon, and that we’re still waiting for the first decent pullback in 4 weeks, I’m looking to tread with caution on the long side for now. We saw the S&P again struggle to clear 1294 today, so it could simply be that we need to see a dip before the buyers are willing to get aggressive enough to produce another meaningful lift in this market. So there are still some bullish setups, but I’m not looking to load the boat here due to the limited follow-through we’re getting when strength comes along.
I’ll cover my game plan for tomorrow in the video, and as always, feel free to share your own thoughts, trade ideas, and questions down below in the comments section.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
Video Stocks Discussed: CP, FII, LIFE, OIH, SFLY
Swing Trading Candidates:
SFLY trended steadily lower for a few months before stabilizing in recent weeks. On the first trading day of this year, the stock made a new low but then finished positive, and then on Friday it undercut that level only to reverse back up again to hold support on a closing basis. Now the stock is sitting just beneath a trend line, which if crossed, could spark some short-covering. I’ll be a buyer if this one clears $23.50 to start a recovery move. As with all swing trades, my stop and target levels for this stock are on the Hit List here inside the Hideout.
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The Hit List is a separate post which contains discussion on open positions and swing trade stops and targets, so be sure to check it for further details on swing trades.
I like the background information. My wife and I both work, with busy jobs, and when we get home it’s all we can do to look after and play with the kids, cook supper, do the chores, get ready for the next day etc.. We don’t watch TV. I haven’t found time to keep up with the financial news, along with my current hobby of learning about charts and trading techniques. I glimpsed the market gap up on my computer at work today and wondered what was going on. My thought was … “Oh! It’s Tuesday again.” It was nice to read the theory about why the gap occurred in your letter. I have a feeling though that I might be one of not very many here who are in the dark, as far as financial news goes. I wanted to put in a vote of appreciation for the topical financial news any way, and the discussion of its impact on the markets.
Hey Mark,
Glad you find that kind of stuff helpful, if even just from a curiosity standpoint. I suppose there are headlines every day which get credit for the moves, and generally I tend to avoid those unless I think they truly had an impact. In this case though, it seemed clear to me that the market was playing catch-up as really the only other real pre-market news was from Citigroup (negative) and Wells Fargo (positive), and those banks essentially offset each other (non-event in my book).
Have a great night and go get ’em tomorrow!