Good evening StockBandits!
Last week the market put in some rest with only minor gains being posted in the major averages. New highs were marked early in the week and then respected for the remaining sessions as the bulls defended minor dips by providing support, yet refrained from producing another runaway move.
This is a healthy rest and an excellent way to digest the advance that began at the start of December. We have emerging flag-like patterns for the indexes, and when found within uptrends, those tend to become somewhat reliable continuation patterns.
The only catch right now beyond the technicals however, is the fact that it’s the end of the year and that brings with it a host of cross-currents. This week, we have Christmas with the market being closed on Friday in observance of that. We have New Year’s just a week later, and that’s just from a holiday standpoint. Toss into the mix other factors such as tax-loss selling, end-of-quarter window dressing, index rebalancing, and lighter volume as traders take time off or travel, and the stage is set for some potentially unusual activity.
I’ve mentioned this in the past couple of weeks, and just want to reiterate that this is a time to take it somewhat easy while these end-of-year motives come to pass. New trades should be taken with smaller size and abbreviated timeframes because of these things, and otherwise it’s an ideal time to tend to other matters like hanging out with family and friends, and reviewing 2010 in preparation for 2011 goals and modifications (if need be) to your trading plan. Whether you do that this week or next, don’t let January get here without having some goals in place and some well-defined aspects of your trading that you’re aiming to hone in the New Year.
So as we look to the shortened week ahead of us, the market is still acting strong and still has potential to move higher. Many have in recent days decided the Santa Claus rally has already come, and it may have, but with the charts in such good shape, further upside cannot be counted out. I’ve got several setups on my radar for Monday, and in the video I’ll explain further but for the swing trades this week I’ll be keeping them rather tight and will be willing to make a premature exit if the price action necessitates it. For that reason, keep an eye on your inbox or the Twitter stream (@TheStockBandit) if you’re interested in how I’m looking to manage the swing trades this week.
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!
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Video Stocks Discussed: FAS, SNDK, AIG, CRM, ISIL, ANR
Swing Trading Candidates:
ISIL has pulled back to some short-term support and now looks poised for a move back up. This one needs to clear the trend line at $15.05 to get back on the move, so I’ll use that level as my trigger for an entry on the long side. As with all swing trades, my stop and target levels for this trade are on the Hit List here inside the Hideout, and keep an eye on the Twitter stream (@TheStockBandit) and your inbox for possible alerts related to this trade in case I look to make an early exit due to the holiday action this week.
ANR has pulled back within its uptrend on light volume and now appears to be stabilizing with price trying to turn back up. I’ll be going long for a swing trade if this one can clear $52.45, keeping a tight stop and looking to book rather quick profits. As with all swing trades, my stop and target levels for this trade are on the Hit List here inside the Hideout, and keep an eye on the Twitter stream (@TheStockBandit) and your inbox for possible alerts related to this trade in case I look to make an early exit due to the holiday action this week.
Bullish Watch:
FAS, SLXP, MIPS, SNDK, WMS, LULU, IVN, SODA, DECK, GCI, NAK, RDWR, QLIK, PPO, XOP, GE, ISIL, AIG, EXXI, XME, ACI, EXPR, ANR
Bearish Watch:
CRM, FRO
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.
Jeff, don’t know to what extent subscribers read the comments, or if they understand the leveraged ETFs. So it’s worth commenting that a. one holds them overnight at (often) great peril, and b. they move predominately as the underlying index, so it is always a good idea to watch either XLF or $DJUSFN to see what the underlying index/sector is doing rather than watching. in this case, FAS alone. There is sometimes a divergence between FAS and XLF (which I watch) but it will always resolve in fairly short order to XLF trend. I find it is not a bad idea to trade FAS using support and resistance levels from XLF. And always remember that FAS moves about 3 times XLF. So to see a potential loss/gain, examine the percentage possibilities of XLF then translate them into prices of FAS (and allow for a little overshoot due to the effect of the high leverage). I will try to follow other comments on here, so that if others who are new to the leveraged ETFs ask additional things, I can put my 2cents in also.
While I am on ETFs, personally, I trade the indexes using TNA and TZA (Russell 2000 = IWM) and SSO/SDS (S&P 500 = SPY). I find the NASD 100 (QLD/QID ==> QQQQ) to trade peculiar (for me) so I am rarely successful. I find SSO/SDS very hard to make money with (they are only 2x not 3x) because the potential loss is too large compared to the potential gain. But in all cases, the underlying index has to be trending and the best time to enter is as the trend is being established.
Hey Jon,
Thanks for sharing your thoughts on this, I always appreciate when you chime in! You bring forth some excellent points which stand on their own, and XLF is another one to keep a close eye on alongside FAS. I had noticed the pullback in some of the banks (JPM most notably, though it has not yet stabilized), and felt for a single-day turn higher FAS could offer the best bang for the buck, hence it’s listing tonight.