Good evening StockBandits!
Last week started out with a Monday rip to new highs, adding to the prior Friday’s minor breakout and clearing the June highs. That confirmed a higher high and a higher low in the intermediate term, but it did leave the market quite stretched to the upside after the run which began Sept. 1st. We drifted only slightly lower for the next 3 sessions, only to gap big on Friday and go out near the highs of the day to mark new recovery highs.
To see a market run with momentum isn’t much different than an individual stock, as there are traders on the right side who don’t want to let go and traders who are trapped and must exit at bad levels. Right now, anyone short this market is feeling the pain, and those who are long know it. That means the dips are extremely shallow and short-lived at the moment, which is keeping the accelerator on the floor.
We’ve come a very long way in a very short time, and although a rest would be quite healthy, there’s still no sign of one yet. Underperformance is a major factor in the market for those who manage funds, so when the market takes off, underinvested money managers are forced to chase in hopes of making up for lagging performance. That’s a big reason right now we’re seeing relentless buying, especially as the end of Q3 arrives this week. And as the calendar progresses, the year-end could quite easily spur this same performance anxiety.
There are a number of good reasons for this bullish move. A potential higher low was established in August, and with key support zones holding, the buyers have piled on to build this momentum. We also have the catch-22 situation of either an improving economy or a Fed which is willing to add further aid, which is a win/win for the bulls. The only problem is finding a spot to jump on board without being among the last to buy into this phase of the rally.
I’m not inclined to chase here, as there are a ton of individual stocks which are bullish yet very extended. That’s a highwire-type scenario, and it’s just incredibly likely the easy money has long since been made for this particular run. Waiting for a pullback or a rest is far better in terms of managing risk, and one of those two will arrive, allowing new setups to build and stocks to somewhat reset for a possible second run.
In the meantime, the NAZ is working on filling a gap from mid-May as each of the indexes start to approach areas of overhead congestion, so this is a time where exercising some caution is certainly warranted. Abbreviated timeframes for new trades is best, at least until some basing action is seen. Getting left behind and facing the feelings of being underinvested in a runaway market is never fun, but chasing overextended stocks after a major lift often proves to be costly, and that’s even worse.
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: GDP, FORM, MASI, MMR, SNDK, JKS, IMAX
Swing Trading Candidates:
IMAX recently cleared an important trend line with a solid multi-day advance, and since then has put in some needed rest on light volume. This one looks set to make another move higher if it can clear $17.20, so I’ll be a buyer there if it gets on the move. My stop and target levels for this swing trade are on the Hit List here inside the Hideout.
Bullish Watch:
GDP, PVA, MMR, LAZ, SPRD, AGCO, DO, SHLD, TTM, IPI, RIG, RRC, BIG, FORM, EXXI, STP, IMAX, GSM, XRTX, TDC, VCLK, TRW, N, DE, MASI, ALXN, WCC, NTGR, AXP, SINA
Bearish Watch:
EGO, JKS, SKX, SAFM, VMC, SNDK
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.
