Good evening StockBandits!
Traders returned last Tuesday from a 3-day holiday weekend to produce a spirited rally which took the major indexes considerably higher. The RUT exceeded its prior high with a solid break of a descending trend line, while the S&P 500 cleared a similar trend line and stopped just shy of its previous short-term high. That buying enthusiasm saw no follow through, however, as the market came under pressure for the remainder of the week.
From Wednesday into Friday morning, we saw steady selling which took the indexes to new multi-week lows. Thursday night here, I noted that a downside gap on Friday could set the stage for a rally attempt, and that’s exactly what we saw with a poor start after the jobs number and then a few hours of steady upside. That rally attempt faltered though, as traders showed their unwillingness to hold positions into the weekend and instead dumped shares in favor of cash ahead of the closing bell. As a result, the market rolled back over and finished closer to its lows of the day than its highs.
At this point, the indexes remain in poor technical shape, having now created new lows with last week’s slide. At the same time though, we’re getting short-term extended to the downside and a bounce could arrive any day. While it will be important to see the nature of the bounce when it arrives, perhaps more important will be the next wave of selling. Should the bounce happen to be brief in duration and relatively sharp, it will indicate more short-covering and less real interest in the long side, which could make it prone to failure. However, if we see the market able to stabilize a bit and the next pullback happens to be shallow, then the stage may be set for a rally which has more staying power.
In looking through many charts this weekend, one thing is clear: there aren’t many setups on either side of the tape. Most anything which had a bearish setup has broken down with all this weakness, and most stocks which had been constructing bullish patterns have cracked as well, negating those patterns. Cash is still a great thing to have on hand here as the market continues to correct, so I’ll be picking my spots carefully when it comes to new swings. For tomorrow’s session, my interest lies in just a few setups for quick plays.
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!
–
Video Stocks Discussed: NUVA, EQT, CIEN, SOHU, DOW, SQNS, ARCO, X, WLP
Swing Trading Candidates:
NONE TONIGHT
[table “58” 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.
