Good evening StockBandits!
Monday’s strength saw some follow through early in today’s session as the indexes continued their rebound from last Friday’s lows. By late morning, however, the highs of the session had been put in. A mid-day pullback was met with buying which failed to reclaim the morning highs, so as the afternoon progressed we saw some accelerated selling kick in. The late-day slide was met with a quick bounce ahead of the closing bell, but the damage had been done and in the end we saw the major averages unable to add to Monday’s gains.
The bulls clearly have a limited amount of confidence here. We saw aggressive buying into early April, but then the mood shifted a bit. Pullbacks were only met with modest bounces, and soon some lower highs were created on the daily charts. In the past few weeks, dip-buyers have completely disappeared. The indexes are still in correction mode, and the lack of follow through today on the heels of a big bounce Monday suggests it was merely short-covering we saw yesterday.
At some point, stocks will again find their footing and the dust will settle and reveal some great opportunities. For now, it’s imperative that we stay selective with new plays and allow this correction to play out. Attempting to buy in the face of weakness can be a recipe for pain, as an early entry equates to being wrong. Prices have come down from the spring highs, but we don’t have any technical evidence to suggest the pullback is done, so we have to respect the short-term downtrends.
I’ll run through a few of the indexes here and then share some new plays I’m eyeing.
NAZ – The NAZ stopped 20 points shy of the 2887 level today, ultimately finishing almost 50 points shy of the 2011 high. This makes (for now) the rebound a single-day effort, so the next few days could be pivotal for this index if it’s going to stabilize. Otherwise, 2753 is next support and we could see this correction continue.
RUT – 772 was support until broken last week, and today we saw the RUT rally right back up to that area and get turned away. Until that level is reclaimed, this small-cap index remains under pressure.
Charts of Interest:
Below are some charts of interest, from market leaders to example charts:
AAPL bounced sharply from the low end of its downtrend channel, and today it reversed lower after reaching the upper trend line. This is the operating channel until we see a clear-cut exit one way or another.
CP is caught in a $7 channel here and is approaching the $72 support zone. If we see that level get broken, it could bring a measured move down to $65. I’d like to see it get closer to that level before considering a play.
CTXS was highlighted here last night and posted a decent gain today, finishing positive. It may have a little more room to rally but will likely need some help from the NAZ.
LULU has respected $70 from both sides lately and today the stock rallied back up to that zone, only to finish shy of it. That’s the level to operate on for the next few days, as this one is bearish until that level is reclaimed.
POT has approached key support here and so far hasn’t lifted. A bit more time stabilizing here and it may offer a play.
Watch List & Short-term Setups:
Below are stocks which are starting to set up but which are not quite ready for multi-day plays. These may provide short-term moves if the levels highlighted below are crossed, but should remain on watch a bit longer for those with multi-day to multi-week timeframes.
AZPN is in a channel here after pulling back from its recent high. A move through the upper trend line would occur at $22.05, but I’d only trust it for a very quick pop given the state of the market right now.
SYNC is a volatile stock but it has shown some nice recent momentum. The stock is trying to consolidate here beneath a trend line, currently at $10.90. If it can tighten up for a few days, it may offer a potential swing. Otherwise, a push through the trend line would only be for a quick trade.
CAT is bouncing here within its downtrend and trying to form a rising wedge. I’d like to see another couple of bars to help this pattern become a bit more clear, but it may eventually offer an entry on the short side.
SLW has seen a bounce within its downtrend and now has a small rising line of support at $24.90, which if broken, could offer a quick trade on the short side.
New Swing Trades:
These are the stocks I’m setting up for new plays. I will wait for my trigger price before entering, and all stop and target levels are provided below. For those of you who are new here, please see the Swing Trading Strategy for more details on how I manage these trades.
APOL is caught in a downtrend and has seen a small channel established over the past two weeks. A breakdown from this channel at $31.70 would be the next technical entry on the short side, so I’ll enter there for a swing with a stop above the channel. Details for stop and target levels are on the Trades Overview grid below.
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Trades Overview:
This list is a look at our current & potential swing trading positions. Stocks we are already in have “triggered”, while those we are considering for plays have not triggered. Click post title to view print-friendly link.
BBG triggered & stopped, APOL added
Open Position Notes:
UPL climbed higher this morning but ran into resistance around $20. From there, the first pullback failed to find buyers, and the stock slid lower for the remainder of the session. Volume was light and the stock did respect yesterday’s low, so I’m going to stick with it and see if it makes another attempt at the upside.
Closed Positions:
BBG triggered a buy today as it turned up to clear the descending trend line at $21.40. However, the stock saw only a little more strength before a downside reversal set in, erasing the day’s gains and ultimately breaking to a new low to stop me out for a 5.1% loss. While these kinds of head fake moves are frustrating, discipline must be adhered to particularly in the case of a stock undercutting support.
