Good evening StockBandits!
Early indecision gave way to some weakness mid-morning, sending the indexes into the red as they continued their retreat from their highs set last week. That brought about a break of both 2887 (NAZ) and 1335 (S&P 500), but neither could stick as those levels got defended. We saw a big spike higher late in the day off the lows of the session, erasing much of the day’s losses and leaving the market little-changed.
Days like this can make for some difficult trading, but for the bigger picture they can prove to be short-term turning points. We’ve gotten a multi-day pullback, which was healthy to see, and the buyers are stepping in to defend some recently important levels. More time and strength is needed before we see that scenario play out, but at this point the bulls have a fairly good shot at making it a reality.
Volume continues to be light overall, but that’s par for the course when in the smack dab middle of the summer. News and momentum could certainly change that, but until we see otherwise, it’s important to recognize the reduced liquidity and make position size adjustments accordingly.
By the way, here is a link to a recent webinar I gave in conjunction with the Market Technicians Association outlining some important concepts. I think you’ll find it useful when you have about 45 minutes to watch it.
I’ll run through a few of the indexes here and then share some new plays I’m eyeing.
NAZ – The NAZ finished 100 points off its high from last week, but right at an important level (2887) after a multi-day decline. This sets up a good scenario for the bulls to produce a bounce, but they’ll have to earn it if they want this to be another higher low.
SP500 – The S&P posted its 5th straight decline today on below-average volume, testing 1335 successfully. This sets up a nice rebound situation for the bulls, the question is whether they’ll take advantage of it.
RUT – The RUT saw another decline today to make it 5 straight, but it rebounded late in the day and held above 784. This gives the small-cap index a nice shot at creating another higher low if it can stabilize in this area.
Charts of Interest:
Below are some charts of interest, from market leaders to example charts:
WMT never comes to mind as a momentum leader but it’s playing that role of late with plenty of green, even in the face of what has been a weak market. This is a setup to resist at this point as it needs to rest and/or consolidate before a buy is prudent.
GS is still caught in its range for now, lending little help as of yet to the financial-heavy S&P.
NFLX is behaving well here as it’s constructing this bull flag pattern. A little more time may be needed, but once the $85 level is cleared, buyers will likely emerge once more.
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.
DVA has made a big move and finally has put in some rest. A turn higher from here through the trend line could produce a short-term pop, but this is not a swing candidate for me as momentum seems to be slowing a bit based on the last advance.
HLX is acting well here with a recent lift through a downtrend line and then a week of rest. Today the stock tried to turn higher, but volume was lacking, so it’s still caught in its base. I’m going to keep this one on the radar for now and see if volume starts to come in with strength in price.
NSM is facing short-term resistance here after a brief rest of a few days. This setup looks ripe for a momentum pop if it can make a new high.
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.
X is starting to act better of late with higher lows, and this pullback from the highs of last week has only surrendered a portion of the previous advance. A turn higher through $20.90 will trigger a buy for me as a swing trade. Earnings are due out at the end of the month (7/31), so there’s time for this one to strengthen if it starts to turn back up. I’ll look to be out ahead of earnings for sure, but I like the risk/reward here after this pullback. Details on stop and target levels are on the Trades Overview grid below.
MCP has a different kind of pattern than what I will typically play on the long side, but I like the risk/reward here after a sharp pullback into support. The pace of the pullback has also slowed in the past 2 sessions, so if price starts to turn back up we could see a quick lift. I’ll go long if $19.70 is cleared, which would cross Tuesday’s closing price, and will have a stop beneath support. Earnings are scheduled for early August, and I’ll be out ahead of the release. 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.
JBHT closed, X & MCP added
Open Position Notes:
CINF held up very well today once more, just as it has in the past few days despite market weakness. Today the stock was able to finish positive with the afternoon market bounce, and the daily chart looks like it could pop anytime if it can push through the $38.20 area. Earnings are scheduled for 7/26, so there’s some time before I’ll look to bail out. My stop has already been tightened, and my target isn’t out of reach from here. That said, the stock needs to now catch a bid and then I’ll evaluate the price action if it’s able to turn higher.
DNKN again pulled back today to test support (former resistance) and was able to hold. While this persistent testing over the past few sessions keeps looking like the stock might break down, it has so far proven to be beneficial to see buyers in that area stand their ground. What I’d like to see now is an attempt to turn higher, as that may give us some better insight into just how intent the bulls are in this name. Earnings are still about 3 weeks out, so there is still some time for this one to go.
Closed Positions:
JBHT pulled back today to make a multi-day low and start filling the gap from early July. This stock made a nice initial turn higher since my entry, but has failed to show continuation so I had tightened my stop in order to book a gain of some sort in case it pulled back ahead of Monday’s earnings report. Today’s move took me out for a modest 1.7% profit, but given the lack of follow through I’ll take it.
