Evening Watch List for December 15th

Mish Schneider | December 15, 2014

For all intense and purposes, when an instrument such as NASDAQ (QQQ) has an inside day, (we could arguably say 2 inside days since last week, the Wednesday and Thursday highs were virtually the same), the technical setup is a no-brainer. You short the break of the lows, buy the break of the highs. But, as this truly is the year of departure from conventional wisdom with the contrarian horse all saddled up that did not happen easily last Friday.

Instead, QQQs opened lower taunting the bears, then proceeded to rally back over the lows of the prior 3 days and after trading above that 3-day lows most of Friday’s session, gave it up near the end of the day, failing 1.10%. I am focused on QQQs because of the runaway gap that occurred on October 31st that has yet to fill-bullish until it does.

Furthermore, Friday’s session ended with what is known as an inverted hammer candle (After a downtrend, the formation of an Inverted Hammer may be bullish because prices hesitated their move downward by increasing significantly during the day. Nevertheless, sellers came back into the stock, future, or currency and pushed prices back near the open, but the fact that prices were able to increase significantly shows that bulls are testing the power of the bears. What happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower.)*Online Trading Concepts

Turning my attention to IWM or the small caps, they had had a true 2 inside day formation coming into last Friday. However, although IWM was weak, the 200 DMA with its younger brother the 50 DMA right below that kept a lid on what could have been a disaster day from happening.

The Dow, on the other hand, where the blue chips and particularly IBM live, took the hardest hit (down 3.7%) last week. This appears to be a reflection on global growth concerns which of course includes falling oil prices.

All last week I wrote about public perception regarding interest rates. Indeed, the continuation of the rally in TLTs or the Long Bonds, presents a crystal clear flight to safety rather than a relief that the Fed will keep rates low.

Stocks had their worst week in two-and-a-half years losing 3.5%. Oil is at a five year low. Next they’ll be telling us Santa Claus does not exist! 
Watch: Oil, Rates and Inverted Hammer in QQQs. If Oil rallies, Rates rise and QQQs hold, will look a lot alike Christmas once again!

S&P 500 (SPY) 200.22 the 50 DMA to hold or not. Subscribers: Negative pivots in all

Russell 2000 (IWM) Another inverted hammer candle sitting atop the major moving averages. If nothing else, a technical analysts dream!

Dow (DIA) Remember my vote as the first one to reach the 50 DMA-close and getting closer. 50 DNA is 172.47

Nasdaq (QQQ) We’re counting on you Nas. And if you can’t hold and recover over 103.55 that runaway gap looks like the runaway ain’t so far from home.

KRE (Regional Banks) Holding onto the 50 DMA which is sloping positive-still hope

SMH (Semiconductors) Support at 54.00 and over 55.00 much better

IYT (Transportation) Held up better than most but that is only part of it-looks weak under last week’s lows

IBB (Biotechnology) Closed beneath the fast moving average but into some support at 305.

XRT (Retail) Consumer confidence gave this a boost-needs follow through over 93.08

IYR (Real Estate) Testing the bottom of a recent range between 76.00 and 77.50

GLD (Gold Trust) Friendly near term unless it cracks under 115.75

USO (US Oil Fund) Will wait for signs of last week’s final gasp a possible exhaustion gap after some big volume and lots of shorts

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs WOW

CORN (Corn) Subscribers: First close over 27.00-looking for confirmation

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: 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:

EXPE Prefer to see this over 88.70 the 10 DMA but for now, like the outperformance on Friday with risk 86.18

Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an 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)

AVGO Negative pivot but keeping this here as it holds the 10 DMA. Max risk now 98.19 and over Friday’s high should follow for mini to swing

SWKS Negative pivot but keeping this here as it holds the 10 DMA. 68.26 max risk and like over Friday’s high for mini to swing

ROST Inside day and teetering around the 10 DMA at 90.47. If that holds, and this takes out 92.08 could see a fresh signal for mini to swing

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:

TSO Still above the huge monthly chart breakout so dips could be opportunities. Like if holds 72.00 and if clears 75.86 R1 and the 10 DMA

Phase Change:

PNRA Seasonally strong in December. Like the strength Friday with 164.11 close support to hold and the 50 DMA 166 to clear and close above

CYH Again, had to trade defensively when this could not close above the 50 DMA. Now, if 49.20 holds, may have another shot over 51.28

ONVO Big move Friday crossing the 50 DMA for an unconfirmed phase change to recovery. If the 50 DMA holds at 6.28 could be bottoming for 2015 as this was a 2014 pick

FNSR Provided 17.53 holds, this has retraced back to the 200 weekly moving average which means if clears 19.00 next week, that’s bullish

SFM Will be a pick for 2015 for sure. This now cleared the 50 DMA but remains in middle of channel. Over 31.42 takes out channel and the 200 DMA

GERN Another 2015 pick. Over 3.35 considering adding back ½ of what we sold and holding against 3.00

Shorts:

Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing

EL Unconfirmed phase change to bearish with converging moving averages. 73.54 good risk with lots of room to downside for swing

PX Probably like an OR high failure better but looks like its failing a long term bullish pattern

Category 6: N/A

Best Best wishes for your trading, 
 
Michele Schneider

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Mish Schneider

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