Not the first time we have seen a correction through time rather than price in the overall market. That scenario generally follows a low volume environment exactly as the one we have been in currently-active investors and HFTs main participants with little institutional and long term equity holders.
For us active folks, these scenarios lend themselves to A) choppy markets B) good riddance to weaker longs with tighter stops C) opportunities to find short positions as some hedge D) time to cherry pick instruments that are riding a volume wave and good technical pattern
No, that is not a multiple choice question, rather, correct answer: all of the above!
Personally, this is one of my favorite times in the market-nothing happening to fear a reversal of trend, time to think about what to buy during the correction that affords the best risk/reward and finally, cleaning up the model portfolio of trades that could keep one up at night because with the rally they did not go deep in the money, nor hit 1-2 profit targets along the way.
S&P 500 (SPY) Day 11 and counting of the breakaway gap. Volume super low Subscribers: Negative Pivots in all except QQQs
Russell 2000 (IWM) Inside day which proves my time correction point
Dow (DIA) Holding the Friday breakaway gap
Nasdaq (QQQ) Resting and holding with an inside day
XLF (Financials) Another healthy inside day setup
KRE (Regional Banks) Healthy inside day
SMH (Semiconductors) that inverted hammer candle meant nothing after all-readers: the lesson is always look for a second day confirmation
IBB (Biotechnology) Over 250 next stop around 270 I gather
XRT (Retail) When a former vulnerable instrument hits resistance and barely retreats-excellent sign!
IYR (Real Estate) Failed the fast moving average which most likely is a result of the firming rates
ITB (US Home Construction) Similar to XRT, performed well with an inside day
GLD Acted well in face of firmer rates-inflation fears?
XME (S&P Metals & Mining) Subscribers: Good digestion above the 200 DMA
XLE (Energy) Today was a good time to take some profits in this group
FCG (First Trust ISE Reserve NatGas) 22.30 support with another good looking chart if clears 2014 highs
TAN (Guggenheim Solar Energy) 6 days of compression and worth watching
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs and there she is-second time under the 50 DMA this year-has to confirm
PHO (Power Shares Water Resources) 27.23 2014 high
UUP (Dollar Bull) So ready to clear the 200 DMA now
EEM (Emerging Markets) Breakaway gap follow through yet again
IFN (India Fund Inc.) Parabolic mode
FXI (China Large Cap Fund) New high close for 2014
BAL (Cotton) Subscribers: Possible slingshot low
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:
SPWR Like to see S1 hold and a move now above today’s high and R1 which line up
GT Classic Nugget with risk to today’s low should it clear 27.10
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:
CI A good category 2 condition 2 example which if holds todays low and clear today’s high lines up with R1 and the 10 DMA
GMCR After news of deal with Subway, now over R1 and today’s high line up 117.42 with risk to S1 good
HUM Like a risk to 125 and over R1 clears everything 127.33 for a miniswing
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)
PEP Has to clear 88.48 and stay there to get going plus hold 87.90
PM In a tight consolidation for a new leg up if clear 88.70 Miniswng trade now
XOM 102 point to clear now with 101 area to hold-pivots are slightly negative
Category 4: (Rip Tide) N/A
Phase Change:
YOKU Cleared the 10 DMA with good volume-now has to hold 19.50 area to continue
IGT Inside day after huge move. Can use todays low for a mini since no good swing risk
LVS Slingshot low with volume and range-classic. Over R1 73.69 will get me back in with risk now about a 1.5 ATR risk
CIEN over the 200 DMA or 22.94 is a good entry point with stop under whatever the low is tomorrow if it clears
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
IBM Under the 200 DMA (184.84 the risk) and looks like it seventhly will fail the 200 weekly moving average
Bye For Now!
