Entrée Du Jour: Forbs
Market At The Top-Nervous?
Midway through the day last Friday, I’m certain many traders started to get nervous as what many believed would be obvious-a session gapping to new highs after last Thursday’s performance- turned into yet another sheep retreat followed by a quick, albeit mild, poop.
For new readers, by Sheep I mean the Year of the Sheep, which is the Chinese image for 2015. Since February, the action of the market has uncannily resembled the personality of sheep-mainly peaceful, loves to herd and stay confined within a fence. Can be vulnerable to wolves and will occasionally jump fences, but most of the time-you guessed it-happiest living within its range.
It was the S&P 500 (SPY) that began making new highs, then retreating from them, or eliminating so to speak, and yet ultimately closing green.
The Diamonds (DIA) and the Russell 2000s (IWM), had inside days, thereby, indicating a more “just chillin” while they digest persona.
A Classic Current Consolidation
Rarely do I write about a specific stock, but one that perfectly illustrates the trading range that I’m certain traders are eyeballing, waiting for it to break one way or another is Panera (PNRA).
PNRA has had a range of $5.00 for 22 days ending last week. As it tests the low end, notice the wicks on the candles. Long because it flushes out longs, then rallies-always holding the bottom of the range. Now, notice the top. There are both wicks and bodies of a wide candle. The selloff ensues after it tests the top of the range.
Is Panera the perfect place for sheep to dine? Yes, if they like ranges (and Forbs)-they do (and more recently, they also like the announcement that PNRA is eliminating 150 different preservatives and GMOs from their menu.)
Point is, the market is in a much wider range of course, incredibly respecting the boundaries five and ½ months into the year.
Will The Market Break The Range?
Very possible that PNRA and the market will bust through as we begin next week. For the market, watch SPY in particular, as it ended on a new all-time high close. The DIA needs to follow in kind.
S&P 500 (SPY) A year ago the breakout projected a move to 220. Now, looking more feasible. Subscribers: Positive Pivots in all except DIA-marginally negative
Russell 2000 (IWM) Inside day. 120-123.85 range within the range-only index in warning phase
Dow (DIA) Inside day with the highs so close-182.68
Nasdaq (QQQ) Has room to the top-111.16. Support at 107.50
XLF (Financials) Over 24.90 takes out all of the 2015 consolidation
KRE (Regional Banks) Classic example of sheep eating, then you know what
SMH (Semiconductors) Just needs to hang out and not selloff
IYT (Transportation) Better. Over 156.60 even better
IBB (Biotechnology) Just needs to hang out and not selloff
XRT (Retail) Held where it needed to. Over 99.65 clears the 50 DMA
IYR (Real Estate) This popped back over the 200 DMA-awesome!
ITB (US Home Construction) Looking better for a bottom in place
GLD (Gold Trust) Unconfirmed Accumulation Phase
USO (US Oil Fund) Tested 20.00 and popped. Looks good still
TBT (Ultrashort Lehman 20+ Year Treasuries) Bonds had a reprieve Friday and rallied taking TBTs back below the 200 DMA. Never though the rates would go straight up-nor should they
EEM (Emerging Markets) Continues to show basing action and beyond
IFN (India Fund Inc.) Interesting formation-through the 200 DMA looks good
EWP (Spain) Continues to show basing action and beyond
EWG (Germany) Looks ripe of higher
EWI (Italy) Took a partial profit here on Friday
FXI (China Large Cap Fund) Look at the runaway gap form April 8th. Still holding
RSX (Russia) New 2015 high and close-still holding tail
CORN (Corn) Inside day
BAL (Cotton) Like the chart overall
DBC (DB Commodity Index) Love this
SGG (Sugar) Holding the 50 DMA
JO (Coffee) A close over the 50 DMA will be first time since November 2014
PHO (Water) Took partial profit
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
***Market Tone: Short-term Positive 2, Intermediate-Term Positive 7, andLong-Term Positive 10. NOTE: Market Tone is updated before the open each day and reported to you on twitter.
Category 1: N/A
Category 2: N/A
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)
PNRA Slightly negative pivots. With 22 days of consolidation, the move will be well worth the time we’ve taken to write about it each day. 180 still max risk. Over 184.21 shut your eyes and buy. A 5 or 30 Minute OR
Category 4: N/A
Phase Change:
JCP Have ½ and will look to add using same stop if clears over 8.70. The number of shares will total the $500 risk to the stop
SLB For miniswing, over R1 92.84 clears back over the 200 DMA. Has to hold at 92.00 for mini or the floor traders pivots
Reversal Trades: (Glass or Brick Wall Bottom or Top):
AWAY ORR only now against 27.40 miniswing
Shorts: Focus List shorts: WFM (inside day under S1 good) TDC Under S1
Category 5: N/A
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
