Good evening StockBandits!
Finally we saw stocks take a breather today with minor net changes and mixed results. That equates to a well-deserved day of rest for this market which has been running nonstop since 6/27. Today’s action (or lack of it) was a welcomed sight for those of us eager to see stocks begin basing and digesting this big run. Today may have been the start of that.
Generally speaking, the sharper a move is, the more prone to reversal it becomes. However, it’s a little more tricky when we see one-way moves which carry as far and last as long as this one has. When that’s the case, it has a different effect than the usual 1-2 day spikes which often are met with an abrupt pullback. In this kind of a situation, it catches so many off guard, that defense is the only response. That means shorts who got caught on the wrong side of this move are quick to cover in hopes of repositioning at another level, and underinvested bulls feel the need to play catch up by putting cash to work on virtually any dip.
Whether we see that play out this time around remains to be seen, but my gut tells me this has potential to be that way. Stated otherwise, I’m expecting some rest and a pullback, but not a quick return to the June lows anytime soon. Instead, I’m interested in seeking out some upside continuation plays and will only short stocks which have proven to be weak despite this impressive rally.
Lately I’ve been patiently waiting for individual stocks to set up for good multi-day moves, and particularly those with some defined risk associated with the pattern. Although the market has made a big run higher, few stocks have met that criteria. We’ve also been in a highly volatile environment with many wide-ranging days and more frequent overnight gaps. That has added to the difficulty of not only locating such plays (as it has led to very sloppy charts), but it also makes managing risk effectively much less possible.
Tonight, there are several setups which are working on quality patterns, including some long-awaited swing trading candidates. I love to have capital at work across multiple timeframes, but the erratic nature of the market of late has simply prevented me from taking overnights. With the dust starting to settle, and with plays which look appropriate, I’m willing to take swings once again in addition to the cash-flow types of day trades I’ve been focused on (speaking of, did you grab TSCO from last night’s Broadcast?…it was a day-maker).
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: VRX, TITN, PANL, JDSU, WDC, CREE, SWKS, AEM, NOG
Swing Trading Candidates:
AEM sold off for several months before spending the early part of this summer attempting to stabilize. Last week this stock may have created a higher low just after establishing a short-term higher high, making this an upside reversal candidate which could quickly gain interest. I’ll be going long if this one clears the trend line at $63.65. As with all swing trades, my stop and target levels for this stock are on the Hit List here inside the Hideout.
NOG corrected in a steady fashion until a couple of weeks ago when it established a higher low. The stock then rallied past a short-term high to change its trend, and now sits in a bull pennant pattern with potential to run further. I’ll be a buyer if this one clears the upper trend line at $22.50 on its way to higher levels. As with all swing trades, my stop and target levels for this stock are on the Hit List here inside the Hideout.
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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.
