Good evening StockBandits!
This week I noted the possibility of the market taking its time to absorb the news before making a big move, and it was worth waiting for. My mention last night of “perhaps the collective market needs to sleep on it before making a decision” ended up holding some merit, and apparently that’s exactly what traders needed as today the buyers woke up eager for action. The futures trended higher during the night, producing an opening gap to the upside this morning, and from there the market never looked back.
The technical setup heading into today was very much of the make-or-break variety, as the steep uptrend channel recently narrowed and the April highs were being tested for the NAZ and DJIA. Today we got a truly decisive move in the form of an upside breakout on heavy volume across the board. Even the financial stocks which have failed to participate in the rally since September (BAC, C, JPM, WFC, etc.) posted big gains. It was a landmark day in many ways, but most notably the fact that 2-year highs were seen for each of the 3 major averages.
Anytime we see persistent strength like we’ve had for the past couple of months, it makes the trading environment a bit more tricky. That’s because stocks tend to get caught in a vacuum, and it seems everything is going up. That naturally limits the amount of plays available (since shorting is more difficult to do in exceptionally strong conditions), but it also makes it more difficult to determine which are the leadership stocks and which are the laggards. There have been some leaders emerge in the past several weeks which have gone parabolic, but beyond that, many other stocks have moved nearly in lock-step with the indexes. I say all this to make the point that with today’s acceleration move to the upside, it’s likely to bring a bit more lively market than the past few weeks have offered.
The trading environment will improve even more if we can see some more back-and-forth movement, as that allows more stocks to base and create a wider variety of patterns beyond the basic flag & pennant types of patterns which are so incredibly common in these one-way market moves. Stated otherwise, I’m excited about what the next few months hold, as I expect the trading environment for us to improve considerably. That doesn’t necessarily mean higher prices, because we may or may not get those, but it does mean more movement and therefore more opportunities for us.
Heading into Friday, we have the Employment Situation in the premarket, as well as a Bernanke speech during the day. We could see another opening gap tomorrow, but my overall expectation would be to see quieter action than what today’s session delivered. I’m content to stick with my existing overnight (swing) trades, so in terms of new trades on Friday I’m eyeing some day trade candidates which I’ll cover in more detail below.
As a reminder, for a few weeks I’ll be utilizing the written format of the Broadcast as we’re in the process of moving and therefore without the equipment I use for recording the nightly video. Once I have my new office set up, I do expect to be back to the usual video format. To those who prefer the video, thanks for your patience. To those who prefer this written format, I hope you are enjoying seeing more text! At any rate, it’s refreshing to me to be able to mix it up a bit. And of course, your input is always welcomed.
For tonight, my notes are on the charts below for index levels and potential trades I’m eyeing for Friday.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
EAT was listed here last night as a swing candidate and did not trigger today. Normally I’d just leave it on the Hit List without another chart being posted here while I wait for the pattern to confirm (trigger an entry) or fail (subject to removal with no trigger), but in this case I’m watching a rising trend line which is changing daily. So I’m just updating my levels tonight on the Hit List and in the chart below to reflect the new trigger price I’ll be using for a short sale at $18.70 (where the rising trend line currently stands). As with all swing trades, my stop and target levels for this trade will be on the Hit List here inside the Hideout.
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades.
Bullish Watch:
TMO, DRIV, IGTE, SCSS, RHI, NTGR, FCX, UHS, RRC, MCP, PSA, BCSI, ACOM, BMRN, PCX, SD, PENN, ORLY, QLGC, LULU, RIMM
Bearish Watch:
CPLA, PFCB, VFC, AUXL, THRX, XRAY, EAT, LNCR, THOR, CRM, OFC, JAH, OTEX
The Hit List contains stop and target levels for my swing trades.
