Once again news of escalating conflicts in the Ukraine spooked the markets overnight and into our opening bell. However, the fear didn’t last long. Stock indexes didn’t spend much more than 10 minutes selling off before they turned up and spent the day in a lazy effort to climb higher.
The indexes didn’t make it back to unchanged, but many stocks did, and more. So once again, geopolitical events provided an opportunity for swing traders to buy their favorite stocks on sale, and they did. It also provided us with an opportunity to see which stocks and ETFs hold their support levels on a down day as you’ll read about below.
Tomorrow is the last day of summer vacation for Wall St. I’d expect that trading to be thin and boring.
S&P 500 (SPY) - Opened lower but closed above prior day's low. Never even threatened the key 199 level. Just more consolidating at new highs.
Russell 2000 (IWM) - Fell harder than the rest and recovered less, but still holding firm over the 50 DMA breakout level and the 10 DMA.
Dow (DIA) - Followed the other markets.
Nasdaq (QQQ) -Another narrow range day and almost closed up on the day. Helped by TWTR up 3% and the semiconductors (SMH) posting strong gains.
XLF (Financials) - Closed down but spent the day in its 5 minute opening range.
KRE (Regional Banks) - Didn't recover like other groups and closed down .79%. It did hold the 10 DMA and the top side of an important support areas of 38.40-.60. A more robust test and hold of this area would set it up for a sustainable move higher.
SMH (Semiconductors) - The best looking recovery from the lower open of all the ETF's on this page.
IYT (Transportation) - Broke below 6 days of consolidation, but closed back above the low of 15.37 (marginally). I would not buy weakness here. If it slides under today's low, look for major support at 149
IBB (Biotechnology) - Went up when the market when down, but closed lower, and at the low of the day. Feels like consolidation near the highs. The 2014 highs are at 275.40. Looking for a pullback to support in the area of 270 to 268.60.
XRT (Retail) - Hit hard on the open but closed near the high of the day. It needs a rest.
IYR (Real Estate) - Held up very well to create another tight consolidation day on the 10 DMA, and sitting on a good support from 73.50-.30.
ITB (US Home Construction) - Tested the low end of the a tight 6 day range on the 200 DMA and came right back. 23.75 is the key low level to hold.
GLD (Gold) -Back over the 200 DMA, the 10 DMA and 124 which is the swing level to break to move to the upside, but was weak to sideways after its modest gap higher. 123-122 levels are good support.
XME (Metals and Mining) - never recovered from the lower open. Stuck in a range from 42.85 - 44.20
USO (US Oil Fund) - After 6 days of consolidation it broke higher and closed over the range and the 10 DMA (first time in 5 weeks). It's ready to move. I'll focus on the long side. If you look at weekly lows there is another trend line from the 2012 lows that comes in at 34. Based on last week's daily action it time to start looking at last week's 34.50 area as potentially a low risk trade to pick a major low.
XOP (Oil and Gas Exploration) - Nice strong day closed over the pivot area.
FCG (First Trust ISE Reserve NatGas) - Held firm all day. Consolidating under the 20.90 - 21.00 level which is the important level to break.
TAN (Guggenheim Solar Energy) - Pulled back and stopped near the 43 level I've been focused on. If it heads higher, today's low is a good stop.
TBT (Ultrashort Lehman 20+ Year Treasuries) - TLT - Gapped higher as you'd expect with today's news, but may need a rest.
UUP (Dollar Bull) - Pull back day from the 22 level that is probably going to be hard to break. I'll be interested when it pulls back to 21.80. The weekly base is very impressive.
EEM (Emerging Markets) - Big gap down to key support level of 45. Held firm.
IFN (India Fund Inc.) - Held its breakout nicely.
EWW (Mexico) - Held up well and closed near the high of the day. 71 is the support I'd focus on.
FXI (China Large Cap Fund) - Broke below the key level of 40.65, but held key level of 40.30.
CORN (Corn) - Moved up nicely but still in a range.
JO (Coffee) Consolidated under 38, again.
* * * * * Picks * * * * *
NOTE for Friday: First, have a happy Labor Day Weekend! Friday before any 3-day weekend is not a good time to establish new positions so there is a good chance that I won't. My objective is to make money and help you do the same. One characteristic of successful traders over the long term is avoiding loses due to short sighted desires to trade just because the market is open. So let's be careful, patient and prudent tomorrow.
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:
FTI - Showed great strength today. 61.80 is a big breakout. 62.30-.45 is resistance. Use 60.80 as max risk and 61.20 as a good ORR level
SPWR - Breakout over 38.25 didn't hold today but it didn't fail on a daily basis either. 38.25 is still the level I'd like to be over.
GT - Perfect example of what I was looking for today on the lower open - gap to S1 and support then bounce, but there was not an OR pattern to leverage. If it clears 26 there is a vacuum up to 27.50. 25.60 is a great place to look for an ORR. Max risk is 24.93, but for tomorrow 25.20 should hold.
IPG - Inside day. Like it as a swing trade with stop under 19.60
GS - 177 was a key level as I suspected before yesterday. Tomorrow and ORR at this level could be worth a shot. Good stop would be under 176.35, max risk is under today's low 175.89, but I'd pass on that tomorrow.
SMH, BRCM, LRCX, INTC: - The SMH had a very impressive day today and LRCX, BRCM and TXN had a lot to do with it.
- I like SMH as a trade because it's diversified.
- I like BRCM the best because IF it breaks the 39.40-.60 resistance its a 4 year breakout! I'd like to start building a position with max risk below today's low or probing with day trades.
- INTC is a nice flag with lots of momentum
- LRCX seems extended but its a leader and not that far from the 50 DMA so it could run. Look at its weekly breakout at 59 in April and you'll see why BRCM is my favorite now.
Category 2: (Pipeline) N/A
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 below 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)
Category 4: (Rip Tide)
Phase Change:
F - Confirmed bull phase. Look for ORR against 17.30 Max risk under 17.15
WFM - As i said yesterday 38.80 should hold as support sot that is max risk. Today it was clear that 39.20 was a key area too. I expect 39.50 to be resistance too. The price and volume pattern over the last month suggest that the bottom is in.
Shorts:
Category 5: (Titanic) Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
SINA - Looking for ORR against 46.10. Max risk 47.
SCTY - Looks like it broke down today, the there is lots of potential support so if its over 69 I won't enter and max risk is 69.70
Category 6: (White Cap)
N/A
Best Best wishes for your trading,
Geoff Bysshe
President
MarketGauge
Filling in for...
Michele Schneider
