I have often written about blow off rallies (tops potentially) and bottoms. When I do, I cover volumemovement, price action and most importantly, confirmation.
Tuesday’s session raised my consciousness in the small caps (Russell 2000) because it rallied to new highs on huge volume. Today, the price action remained inside the price action from Tuesday on light volume.
The Dow (DIA), also had an inside day on light volume and has yet to clear overhead resistance, in fact, the 2014 high remains well overhead.
The Volatility index closed unchanged. That makes sense given the inside day pattern. However, does it really make sense since clearly the volatility decreased yet not the price action of the volatility index.
There’s more. NASDAQ and the S&P 500 closed on new highs. To keep score-the number of reasons that the huge day in Russells could be the predecessor to a much larger move up-NASDAQ, SPY, Inside days ordigestion, Phase support-bullish-that’s 4.
The number of reasons to support that Russells could be predecessor to a top-3-double the average volume, pause in the action and the Volatility not budging.
A solid portfolio favors the bulls seasoned with some hedges.
S&P 500 (SPY) Not overbought-that’s a good thing too Subscribers: Pivots pivots in all but DIA
Russell 2000 (IWM) Inside day slightly overbought
Dow (DIA) Inside day. Still has miles to catch up or not
Nasdaq (QQQ) New highs
XLF (Financials) Followed through to new highs-nice
SMH (Semiconductors) New high close
IYT (Transportation) filled gap to 134.58-closed below-could be main place to look Thursday for a move up
IBB (Biotechnology) Passed the baton this week but still looks strong
XRT (Retail) Rested with an inside day
IYR (Real Estate) Rested with a doji day
XHB (Homebuilders) Also rested with an inside day with 2014 high 34.27
GLD Looks like an island top confirmed but not that convinced yet Monday was the high
USO (US Oil Fund) Island top confirmed here today-the 200 DMA next test
OIH (Oil Services) Has to clear 49.00
XLE (Energy) Has to clear 88.48 once and for all
TBT (Ultrashort Lehman 20+ Year Treasuries) Probably best to wait for the jobs report at this point
EEM (Emerging Markets) Subscribers: Back to unconfirmed recovery phase
KRE (Regional Banks) Inside day
JO (Coffee) Subscribers: See no reason this is through
SGG (Sugar) Subscribers: Exploded out of recent price action and looks sweet
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 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)
Reports Tomorrow Before Open: CIEN-if this gaps over 26.49 a close your eyes kinda deal
CNQ Over R1 37.05 like this better with risk to today’s lows
AA Set up today on low volume and over 12.16 still a trade with risk 11.82
FSLR If holds today’s low, looks poised to take out 58.85 and keep going
WLP If holds 90.00 could see more upside especially if clears 92.00
Category 4: (Rip Tide) N/A
Phase Change:
GDX Long a second time around with now, a move over 27.00 looking good to around 29-30.00
JBLU Inside day so has to clear 8.88 and hold today’s lows
A One push up takes it over the 50 DMA with today’s low a good risk
IBM Tried and failed the 200 DMA so if goes again with risk to today’s low could be better follow through
JCP Digested the recent move today
SODA has to clear 40.01 and should be good to go
CREE Under the moving averages but a move over 61.50 after an inside day today could be good to follow
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
APA weak and near the lows
Bye For Now!
