Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until February 11th.
Will the third time be a charm? After consolidating for all of 2013, on Friday the QQQ closed above its consolidation range. This is its 3rd attempt to break out on a closing basis. The last 2 attempts (on 1/23 and 2/1) were immediately reversed the following day. Friday's attempt does have the distinction of having closed much further above the range than the prior two, but it lacks a pickup in volume, so other confirmation will be important this week.
The SPY and IWM also broke out of their consolidation ranges so this week I'll use the Friday range as an indication for the market's short term trend.
Subs: The pivots are positive in all 4 indexes.
S&P 500 (SPY) Use Friday's range to gauge the short-term trend. The breakout held nicely, but lacked volume. Look for support at 151.50-.35. Subs: This support zone represents the prior day and swing highs which line up with the 1 day pivot low, intraday low and then S1.
Russell 2000 (IWM) Broke out of nice consolidation on low volume. Look for support at 90.55 and 90.40.
Dow (DIA) Made new highs with the other indexes but did not close there. However, it consolidated nicely in the upper half of its range. Subs: Pivots are positive, but S1 lines up with PDL so be careful if this 139.37 level is broken. Next level is the 10 DMA which lines up with S2.
NASDAQ 100 (QQQ) Big breakout. Note it corresponds with a breakout by AAPL of its own range. Both have room to move and resistance. Friday's range will be a good way to play the next real direction. Look for support at 67.80-.70. and resistance at 68.20-.30. Subs: these support levels are both daily highs and R1/S1 levels that line up.
GLD Extremely compressed. Still trapped between the 200 and 50 DMA. I'd look at a long position over 163.15. A short is worth considering under 161.00
SLV (Silver) Thursday broke down below the daily wedge. Friday did not follow through, but a break of 30.30 could move to 30.00 and 29.70 quickly. If you want to play the failed wedge breakdown look for break above 30.65.
XLF (Financials) Very tight inside day makes 17.62 and 17.55 the two key levels to watch.
IBB (Biotechnology) Still stuck in its 1 month range
SMH (Semiconductors): Helped power the Q's breakout. Look for support at 35.17 and resistance at 35.50. Subs: Look for OR reversals at 35.17 and 35.00
XRT (Retail) Inside day. Look for support at 67.70
IYT (Transportation) Nice breakout but very low volume. 104.80-.65 is key support.
IYR (Real Estate) Nice breakout of a tight 5 day range right under the 10-DMA. Plus it had a big volume strong final 30 minutes. Look for support at 67.84-.70. Subs: look for OR reversals over S1, 67.58. OR breakouts work too.
USO (US Oil Fund) I'd wait for 35.15 to break to consider longs. Shorts watch for 34.50 to break. Subs: pivots are negative
OIH (Oil Services) Back over the 10 DMA and looking like Thursday may have been the flush as I suspected. Had a strong close. Look for support at 43.50-.40. Watch 43.75 resistance then swing highs at 44.12.
XLE (Energy) Strong day closed on the swing high, 78.60. Look for support at 78.20.
TBT (Ultrashort Lehman 20+ Year Treasuries) Trend is up, but consolidation is unclear.
XOP (Oil and Gas Exploration) Another nice move higher. Continues to be the leader in the energy space. Look for weakness to consider a trade.
XHB (Homebuilders) Very tight, no volume, inside day on the 20 DMA and support level of 28.25. Could break big either way use Friday's range. Subs will find a few of its components on the list today.
* * * * * * Stocks * * * * * * *
Longs:
On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly.
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
N/A
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
MOS Inside day. Tight 5 day consolidation. Prefer to be over 61.45 then 62.00 is the big number. Consider OR reversal against S1, 60.90 with max risk of 60.79
C: Inside day in a tight 5 day range. Pivots are negative so prefer it to be over 42.85. Key area to break is 43.10-.20.
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
TRV:Inside day in 4 days of consolidation. Good quick breakout candidate over 79.16. S1 lines up with low of the day at 78.43.
MCD: Trying to bounce off the 10 DMA. R1 and S1 line up with Friday's range and key 3 day range support. Look for reversal or breakouts.
F: Inside day, trying to get over the 10 DMA. I'm looking at this as swing where 13 and the 12.90 should hold. S1 and PDL line up.
SWN: Inside day. Still looking to catch the day that this breaks over 35.00. Reversals have worked well in this stock watch for them. S1 lines up with today's lows around 32.18. R1 and PDH are at a key resistance area of 34.80.
KSU: had an ugly failure from the range breakout on Friday, but recovered, and like CNI, it's worth looking for the breakout again, but I would only trade it over the FTP area of 95.00. The big number to break is 95.30 then 95.89 is the high of the move.
NKE: Pulled back from a nice morning run and stopped on support. Pivots are positive and S1 lines up with good support at 54.30. 1-day pivot high area, 54.75-.85, may be an important inflection point because it was the daily breakout level on Friday.
LVS: Nice retrace to the 10 DMA and daily breakout began to bounce on Fri. The tight Friday range creates a good stop at Friday's low for breakouts or reversals.
DE: Inside day on the 20 DMA, prefer to be over pivot low of 92.40 area.
HD: Back to a Condition 1 (over 10 DMA). Pivot low to S1 line up with key daily support at 66.70. Should hold 66.30.
TSCO: Has consolidated tightly after earnings at big weekly breakout level. Closed over 2 inside days on Friday. Should hold 103.50 with a max risk of 102.30. Key levels on the upside are 104.00 and 104.75-.85.
SHW: Back to a Condition 1. In a tight 5-day range with the key level to break at 164.75. Should hold S1 at 163.
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
N/A
Phase Change:
DLTR: moved to a recovery phase with big price action but low vol. The base is worth keeping an eye on.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ONXX: Looks like it may have bottomed at Friday's low so I'm only interested in a good OR reversal between 76.30 and 76.80 with max risk of 77.20.
RTN: Inside day. Has rallied back up to the 10 DMA. Must be below PDL of 53.77
Other Shorts:
WY: Not in a bearish phase but may be rolling over. Resistance area for OR reversal is PDH, 10 DMA and R1 all at 30.40-.45. Pivots are negative so in a weak market an OR breakdown makes sense too.
JCI: Not in a bearish phase but may be rolling over. Inside day that may have rallied with the market. Max risk is PDH at 31.20. Must be below 30.95
QIHU: Not in a bearish phase but may be rolling over. Pivots are negative and R1/S1 line up the prior day range. 30.80 is support to break.
PVH: Condition 1 bullish phase so be careful. Has a slingshot top pattern. Must break PDL, 122.30, to confirm. If the market is weak this is a strong stock to consider shorting. Support at S1 is 121.68.
GRMN: Bearish phase, positive pivots, and a sling shot bearish continuation pattern. Must be under 38.25 and slingshot pattern confirms under 37.98. Prefer a weak market for this one.
Best wishes for your trading,
Geoff Bysshe
President
