Testing and failing is an apt way to describe today’s action. The morning began with the S & P 500 andRussell 2000 tenuously holding the 50 Day Moving Average. The indexes held during the initial test of the 50 DMA, but failed during the second test. The day continued like this; testing support levels and then failing them. Nasdaq broke out of its inside day, but then slid downward with the rest of the indexes and closed the day under the range of the inside day. The Dow Jones Industrial Average also continued its downward slide, and is now oversold. TBTs continued to climb and made yet another yearly high. TBT has not been at these levels since March, 2012. A correction like this can be healthy for the market and create many opportunities, if you know where to look. I am focusing on stocks that have corrected and are holding support on moving averages.
S&P 500 (SPY) Closed under the 50 DMA, bringing this into an unconfirmed warning phase. Subscribers: Pivots negative.
Russell 2000 (IWM) Closed the gap from 7/10 and closed the day under the 50 DMA, bringing this into an unconfirmed warning phase. Subscribers: Pivots negative.
Dow (DIA) Closed on moderate support. 149.20 is the gap low from 5/3. Watch for that level to hold. Subscribers: Pivots negative.
Nasdaq (QQQ) This is the best performing index. Watch for recent lows to hold. Subscribers: Pivots slightly positive.
ETFs:
XLF (Financials) Nasty drop and filled the gap from 7/5. Oversold and holding the 80 monthly moving average.
SMH (Semiconductors) Watch for 37.34 to hold.
XRT (Retail) Closed below the 50 DMA, bringing this into a confirmed warning phase. Closed on support. Watch for today’s low to hold.
IYT (Transportation) Closed under the 50 DMA. Now in an unconfirmed warning phase. Watch for the 50 DMA to clear and today’s low to hold.
IBB (Biotechnology) Holding the upward sloping 50 DMA and the gap from 7/11.
IYR (Real Estate) Broke the June lows and is now very oversold. May test the 200 weekly, at 58.36.
XHB (Homebuilders) Closed under the 200 DMA, bringing this into an unconfirmed Distribution Phase.
GLDInside day. Watch for today’s high to clear and the low to hold.
USO (US Oil Fund)Inside day. Watch for today’s high to clear and the low to hold. 38.62 is resistance.
OIH (Oil Services)Corrected to and is holding the 50 DMA.
XLE (Energy) Closed under the 50 DMA, bringing this into an unconfirmed warning phase.
XOP (Oil and Gas Exploration) Closed under the 50 DMA, bringing this into an unconfirmed warning phase. Very oversold.
TBT (Ultrashort Lehman 20+ Year Treasuries) Closed at new yearly highs and is now at overbought levels. At the highest level since March, 2012.
UUP (Dollar Bull) inside day. Watch for 21.86 to hold.
EWG (Germany) Subscribers: Closed under the downward sloping 10 DMA.
EWW (Mexico) Subscribers: Now in an unconfirmed Bear Phase.
SGG (Sugar) Subscribers: Gapped under the 50 DMA. Now in an unconfirmed Bear phase.
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) N/A
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can eitherbuy 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)
IACI Holding the 50 DMA and is very compressed. Watch for a breakout or reversal against the 10 DMA.
GMCR Confirmed the bull phase. Watch for a breakout or reversal against the 10 DMA.
BA Unconfirmed Bullish Phase. Watch for a reversal or breakout over the 10 DMA.
FDX Compressed and holding the 10 DMA. Watch for a breakout or reversal against the 10 DMA.
QIHU Very strong. I prefer an opening range reversal against the 10 DMA to control risk.
FB Climbed over the 10 DMA on impressive volume. Watch for a breakout or reversal against the 10 DMA.
KKD 2 inside days. Today’s high needs to clear and today’s low needs to hold.
CI 2 inside days. Today’s high needs to clear and today’s low needs to hold.
Category 4: (Rip Tide) N/A
Other:
NOW Inside day. R1 and today’s high line up. Watch for today’s high to clear and today’s low to hold.
BBY Inside day. A break over today’s high will clear the 10 DMA. Today’s low must hold.
PETM Holding the 10 DMA. Watch for a breakout or reversal against the 10 DMA.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NFX Under 3 converging, downward sloping moving averages. Watch for a breakdown or reversal.
SRPT Watch for a breakdown or reversal. Today’s low must break.
URBN Recently under the 200 DMA. Watch for a breakdown or reversal under S1, which is also below recent lows.
Category 6: White Cap-Having a 2-3 Day correction over the pivots. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s lows
LINE Look for a breakdown or OR high failure against the 10 DMA.
Best wishes for your trading,
Geoff & Matt
