Last night I wrote about the 5 Classic Signs of a Top (please review 03-04-15 Commentary archived on the website) with added remarks that none of those signs had come to fruition on Tuesday in the indices.
That nearly put sheep poo on my face as the session began on Wednesday with the whoosh to new weekly lows, and in the case of the small caps or Russell 2000s (IWM), S&P 500 (SPY) and the Dow (DIA) also breaking the fast moving averages. However, NASDAQ saved the day (and my complexion), proving that when concepts are classic-well, that’s why they’re classics!
Of course, I remain faithful to my hyper focus on the financial sector. The XLFETF hanging in there is tantamount to a sustained rally in the stock market from these levels.
On the sectors that dropped sharply from their highs, such as Semiconductors (SMH) and Retail (XRT) we look for a second day confirmation. We gauge that confirmation by how the instrument closes. Wednesday, SMH closed red but over the fast moving average and right around the low from Tuesday. XRT not as attractive, and although closed around the prior day low, confirmed a top.
Point is, XRT confirmed a reversal candle (one of those classic signs of a top), but not the Semis.
For consistency sake, a note about the only commodity that has exhibitedvolume and had an unconfirmed phase change to Recovery-oil or USO. Naturally, we need a second day confirmation there as well with a close over 18.75 Thursday.
The Shepherd’s staff did not really do much to keep the wolves at bay. Might be time for new equipment-perhaps a Tesla that quietly traverses the field (TSLA closed up 1.4%). Or maybe sprinkle some pharmaceuticals outside the pasture for the wolves to consume as Biotechnology (IBB) ran up over 1% today. Our Assistant Jonathan, suggested a Ruger rather than a staff. (RGRclosed up 3.68%). Harsh, but keeping an open mind.
S&P 500 (SPY) 208.73 the low form February 20th support with a move back over 211 good Subscribers: Negative Pivots in all
Russell 2000 (IWM) Held 122.25 ultimately, but now, unless it gets back over 122.75 could see more correction.
Dow (DIA) 180 needs to hold now or could see the 50 DMA. Otherwise, over 181.50 much better
Nasdaq (QQQ) Held 108 key support but now, needs to clear 108.75 or 106 not out of the question.
XLF (Financials) Key points are the 50 Daily Moving Average at 24.15, the highs since the 02/02 at 24.60 and finally, 24.90-the 6-month January Calendar Range high.
KRE (Regional Banks) 40.00 pivotal now with 41.06 the January Calendar Range High to clear
SMH (Semiconductors) Over 57.60 better but otherwise, look at 56.00 support
IYT (Transportation) Holding the 50 DMA for now which is a good thing
IBB (Biotechnology) Steroids again
IYR (Real Estate) Once could say this was the first one to have a top in January and was a precursor as a result. But at this late date is like an obnoxious “told you so” that I did not say.
ITB (US Home Construction) Came back some with mixed signals. Over the January high but still on a topping formation
GLD (Gold Trust) Support at 115 looking shakier now
GDX (Gold Miners) 20.00 the major support at this point to hold
TAN (Guggenheim Solar Energy) Second gap high this week and with 23% gains we took some profit.
TBT (Ultrashort Lehman 20+ Year Treasuries) Through 45.75 see 47.25 next resistance
UUP (Dollar Bull) I checked into A European vacation today
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:
BKS Has 4 inside days-don’t think I’ve seen that in awhile. 25.46 is the high to clear
BKD Classic condition 1 now with a move over 38.17 with risk more for a swing
MNST Featured in today’s video as a breakaway gap trade. Now, 137.72 is the risk with a move over 140.43 clearing R1-you can do this for a swing
CSC Featured in today’s video as a breakaway gap trade. Should hold 69.00 max risk with a move over 70.31 clearing R1 for a swing.
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:
TOL If 37.00 holds and it clears 38.24 might see a return to 39.00 or higher so a miniswing best
MRVL Cleared the calendar range and now has to hold that level for a tight risk 16.19
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 Another breakaway gap trader that is over R1 now. 129.89 is the high of the gap day and the area to clear-day to swing really depending on risk
FB Like an ORR and cleared the January calendar range high out of the gate
EA Over R1 or 57.53 like it for a tight risk to around 56.75 miniswing
AMZN Positive pivots even with the selloff end of day. 381.54 max risk
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:
WFM Good sell off from highs but still in play and a bit oversold. 54.54 good risk with a move over 55.69 clearing R1-another mini to swing option
Phase Change:
PSX Confirmed Accumulation day. Risk to today’s lows max
SLB Waiting to add over 85.70 with risk for all at 83.16
Shorts: EQR SWI VNO
Category 5: N/A
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
