Good evening StockBandits!
Encouraging economic data provided a positive start to Friday’s session, giving stocks a gap higher on the open. Selling kicked in to erase some of the gains, but when the first bounce arrived, it led to a continuation push higher for the next two hours. The NAZ went right to the 2802 level I’ve noted here multiple times of late, and then backed away for the rest of the session to finish well off its best levels. In the end, the DJIA and RUT each pushed to new 52-week highs, while the NAZ and S&P 500 flirted with key levels at 2802 and 1332, respectively.
So at this point, the bounce continues despite short-term overbought conditions. Some traders would point to indicators such as the McClellan oscillator, but I simply gauge overbought conditions on whether the pace of a rebound is sustainable. Considering the indexes just tacked on more than 7% from the lows set just 13 sessions ago, it’s not a big argument to say that a rest at this point would be a healthy thing. However, stocks still have upside momentum at this point, even after a weak finish on Friday.
That should keep things tricky in the days ahead as traders consider whether to chase this move, lock in some profits, or shift to the sidelines while waiting for more technical clarity. While the indexes have all seen a rebound in the past couple of weeks, we are getting some mixed signals with the DJIA and RUT making new highs for the year, while the NAZ has yet to clear the prior bounce high and the S&P 500 sits right at short-term resistance.
It’s probably best at this point to stick with a disciplined approach and avoid chasing momentum names which badly need rest. If the market is able to sustain its strength, rotation will occur, and stocks which have been basing may be poised for a push. And should we see some selling pressure arrive, then maintaining high levels of cash will of course be a good thing.
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: COF, OPEN, UNP, SIVB, MXIM, ARG, WY, MTL, CAM, RIMM, SNDK, RCL, ANR, CCL
Swing Trading Candidates:
ANR recently made multi-week highs by leaving its trading range on strong volume, and has since consolidated for several days. I’m watching for a push through the $61 level to signal the start of another advance, so I’ll be using that as a trigger for a buy. As with all swing trades, my stop and target levels for this trade are found on the Hit List here inside the Hideout.
CCL continues to act weak relative to the market with a steady decline in recent weeks. The stock is now resting on support, so I’m watching for a breakdown at $37.85 to trigger a short sale. As with all swing trades, my stop and target levels for this trade are found on the Hit List here inside the Hideout.
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.
