Good evening StockBandits!
The indexes gapped lower to kick off the new week on a sour note, and then more selling hit the tape. No attempt whatsoever was made to fill the opening gap as stocks instead gave up more ground as the morning progressed. We did see a bit of stabilization set in mid-day, but the lift from the lows into the close was still rather modest. In the end, the averages gave up 1-2% to finish back beneath some important levels.
We have mixed signals at the moment, and so it’s all a matter of timeframe. Zooming out a little on the charts, we are in a technical situation here where the S&P has a good shot at creating a higher low on the daily chart. We have seen roughly a 50-point decline off the June high, and yet we’re currently about the same distance from the June low. That opens the door for the bulls to step in and provide support at some higher level than 1266, which would have potential to be a bullish signal. However, on the shorter-term timeframe, there’s still grounds for caution as we’ve pulled back hard (Thursday), bounced slightly (Friday), and then resumed the retreat from the June high with today’s action.
My plan is to continue setting up plays in both directions as the setups come along for as long as the market stays in this mode of indecision. I have no desire to predict the next move or get positioned for what I think will happen and then hope the market proves me correct. Instead, I’ll let the charts dictate my moves, stay attentive to key levels, and execute trades as warranted by the price action.
Volume this week is likely to taper off as we get closer to Friday given that it will be the end of Q2 and the weekend before a major holiday with July 4th coming next Wednesday. I mentioned this over the weekend but don’t want to dismiss the importance of reduced liquidity in the days ahead. It’s important to keep that in mind when sizing positions and understand that a little greater slippage may result from this as well.
I’ll run through a few of the indexes here and then share some new plays I’m eyeing.
NAZ – The NAZ quickly gave up 2887 today and now has just 110pts before the June low would be threatened. That is the level which will truly need to hold if the bulls want a higher low on this pullback.
SP500 – The S&P finished right at 1335 on Friday but gave it up today with ease. It now seems set on a test of 1294.
DJIA – The DJIA failed to reclaim 12700 last Friday and now is correcting again. Next support is 12300, followed by 12035 at the June low.
Charts of Interest:
Below are some charts of interest, from market leaders to example charts:
GOOG is again testing key support at $560 here, and a breakdown from here would not only bring lower prices for the stock but could also weigh on the NAZ.
VMW is like many other stocks tonight which are at multi-week support after short-term pullbacks. This is not an ideal short setup for those who like tight stops, although it’s not a bullish pattern either.
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.
IDCC turned sharply higher last week then pulled back slightly. Today it showed nice relative strength and may be ready to pop again, although this is really a momentum play rather than a swing setup due to all this volatility.
VHC is nearing the upper end of this ascending triangle pattern and may break out soon. If it does, we could see a day or two of strength, as the last resistance break only produced a 2-day move. Good setup for a momentum play though.
GMCR is resting just above support and this stock is still in correction mode. A break to new lows would likely trigger more sell stops, so that’s a level to watch for a quick short sale.
FFIV has an unfilled gap from last October and if it undercuts support at $95 we could see a quick wave of selling.
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.
UPL is working its way higher here after the creation of a higher high last week. This looks to be a positive change of character, so I’m looking to buy this one if it turns up and out of this bull flag-like pattern with a push through $21.40. Details on stop and target levels are on the Trades Overview grid below.
JBHT has recent higher lows intact and just saw a 5-day pullback off the high. Today we saw an intraday rebound, and that may indicate the selling is starting to abate. I’ll get long if this one clears $57.30 on the way back up. Details on 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.
UPL & JBHT added, NFLX triggered
Open Position Notes:
CINF pulled back today but finished off its worst levels of the day. That supports the notion of dip-buyers stepping in on the short-term weakness, so we’ll see how it acts on the next bounce. I like that downside volume has remained below average in the past few days, so I’m staying with it.
NFLX showed some excellent relative strength early in the session today, triggering a buy as it cleared the small trend line at $68.50. However, the stock weakened by the end of the day to finish negative and back below the trend line. This is a volatile stock, which is why I’ve given it lots of room to my stop. Nonetheless, today’s action was a bit disappointing. One higher low is already in place (6/14 vs. 6/1), so I’m going to stay with it, but I won’t hesitate to cut it loose if my stop gets triggered.
Closed Positions:
No closed positions.
