Happy July 4th StockBandits!
Fireworks arrived well ahead of schedule as last week the indexes vaulted higher in a nonstop fashion to reach new recovery highs off the June lows. Multiple key levels of former support were reclaimed on the way back up despite quieter volume than we’ve had of late. That was likely due to this being one of the two quietest volume weeks of the year (along with Thanksgiving), but it didn’t stop the buyers. Upside gaps saw no attempt at getting filled, as profit-taking was delayed in favor of chasing momentum and shorts anxiously covering to get out of the way of a runaway advance.
The rebound accomplished quite a bit, both from a psychological and a technical perspective. Psychologically, the bulls reasserted themselves to produce nearly a full recovery of the early-June slide, reminding the bears that they don’t intend to completely walk away at the first sign of a selloff. Technically, levels which were expected to pose as resistance were entirely ignored as the buying never relented. We left the low-level trading ranges of the previous 3 weeks, ,and then ripped right through important levels on the way back up. No matter what happens next, we’re virtually guaranteed to see some additional battles between bulls and bears in the months ahead.
The big question on everyone’s mind is “what happens next?” One could easily make a case for overreactions in price in both directions over the past several weeks, and it’s hard to dispute that. Methodical moves tend to last the longest, yet this market has shown nothing of that sort lately. The most reversal-prone moves are the sharpest, and we’ve certainly seen that in recent days. Just how far the next pullback carries remains to be seen, but we can bet that it’s coming after this straight-up run.
Individual stocks for the most part continue to exhibit sloppy charts. That’s understandable considering we saw a waterfall-like selloff followed by a few weeks of volatile indecision, then a violent rally right back up. Fortunately though, that’s a temporary condition and things will smooth out. Quite a few stocks have recovered to an extent that they’re probably safe from complete breakdowns for at least a little while.
Should the major averages (and of course individual stocks) remain inside these multi-month very wide trading ranges (found between the March/June lows and the May highs), it’s going to continue to make this a trader’s market for a while. Subsequently, working the charts on a regular basis and considering risk for every new trade is going to be critical until we exit the range. That spells opportunity, so long as we stay on our toes and wait for quality setups to emerge.
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: TITN, YOKU, MOBI, TSCO, PLCM, WLK
Swing Trading Candidates:
NONE TONIGHT
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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.
