Good evening StockBandits!
Happy Mother’s Day to those of you who are Moms! You are under-appreciated every other day of the year.
Last week proved interesting as the indexes tagged new highs on Monday morning on the heels of the Bin Laden news, and worked its way lower from there. The indexes were already extended after making sharp moves higher from the mid-April tests of the February lows, and a rest was certainly needed. As a result, the news many Americans had waited over 9 years to hear was used as a reason to book profits. The selling continued through Thursday, when the NAZ and S&P 500 both tested prior key levels and held them on the close. Then, the pre-market jobs report on Friday sent the futures spiking higher, producing a substantial opening gap to the upside. That strength also faded, however, as the indexes gave up about 1% from their morning highs to finish modestly positive on the session.
At this point, we’ve got some key levels to eyeball for short-term support and resistance, so those will be my focus in the days ahead until we see a clean breach. On the top side are the highs at 2887 (NAZ) and 1370 (S&P 500), and on the low side are 2802 (NAZ) and 1332 (S&P 500). While some are quick to jump out and declare last week’s action a “sell in May and go away” environment, I don’t think we can dismiss the remainder of the month so easily. The indexes are still coming off the creation of higher highs and higher lows, and thus far we’ve only seen a modest retracement back down. This pullback could still evolve into yet another higher low, so since the trends are still up, I’m keeping an open mind.
My watch lists have shrunken in recent days as leadership stocks have faltered and bases which had been under construction have been negated with this pullback. That’s alright, and pullbacks can be useful to pare back watch lists. What’s important is that during this period of indecision on the part of the market, that we don’t simply force buys or chase shorts and hope the market proves us right. The course of action I’m sticking with is to let the charts set up, formulate some if/then scenarios for potential trades, and go from there. The market will punish impatience, so I’ll look to maintain high levels of cash over these next couple of days until there are some solid technical reasons to choose a side. My expectation (which is subject to change, depending upon how this market moves) is that we’ll see some opportunities primarily on the long side with some occasional shorting candidates. The charts will decide for me though, so the good news is I don’t need to go with a hunch.
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: AMZN, CSCO, ATI, VRTX, ARW, SOHU, SINA, RCII, MOS, BIDU, COH, PLCE, NTES, OPEN, OSK, GS
Swing Trading Candidates:
NONE TONIGHT
[table “39” not found /]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.
a thought or two….
1. All the market averages are below their declining 5 Day MAs. This suggests that long side trades are not likely to follow through too much. So day trading makes much sense.
2. Many short plays have either led to quick shakeout type reversals or just not done much. And a lot of good short candidates have gapped up at the open. The negative picture for the markets might suggest that some downside follow through might take place. And watching for a gap or move up towards resistance then a move down, might be a good intra-day trade strategy on these weak stocks. Day Trading them seems lowest risk because of all the breakdown failures.
Hey Jon, great points you bring forth here – thanks for sharing them.
I think the MA’s you’re referring to are good secondary evidence of the pullback we still find this market in. We’ve paused at support for now, but the jury’s still out on whether it will hold. The lack of high-quality setups out there which are READY for moves now also supports a shortened timeframe for trading in my book.
And yes, given the overall trend being up, I’m reluctant to short simply because the proverbial market ‘wind’ isn’t blowing south to lend sympathy weakness. Shorting new highs isn’t my thing (thankfully), hence the reason I wasn’t short last week. I think we’ll have our shot on the short side at some point, but waiting for a better time seems most prudent here.
Thanks again for chiming in!