After Thursday’s nasty selloff, the Russell 2000 (IWM), the S&P 500 (SPY), NASDAQ (QQQ) and many individual instruments finished off the week with inside days.
In IWM, the top of Thursday’s red candle lines up well with the lows from October. This is an important resistance level to clear, and IWM has a lot of work to do to be able to clear this level.
I will be watching NASDAQ to see if it can hold the low (81.35) from the runaway gap made on October 18. If this level is broken, the 50 DMA will be compelling.
I will be paying close attention to the inside days in the indices, as the direction that they break can be a very good indicator for the direction of the next move in the overall market. It may even set the tone for the balance of 2013.
Furthermore, the potential Fed taper or at least the perception of one, is in the market now and seemingly waning in significance, although certain sectors will not be as resilient towards the notion of rates firming.
Therefore, traders will be best served to stick with the strongest groups and definitely be aware of the inside day range break, especially in the IWM.
S&P 500 (SPY)Inside day. This needs to hold Thursday’s low at 174.76 and clear 177.31 for more confidence in this index. Subscribers:Positive Pivots in all indices
Russell 2000 (IWM)Inside day wedged between the 50 DMA and the 10 DMA. Needs to clear Thursday’s high. See above.
Dow (DIA) Friday’s low is an important level to hold. If that level breaks look for 154.87 as next support.
Nasdaq (QQQ) Inside day. 80.87 is the high before it gapped up. If that is not filled, very good sign.
XLF (Financials)Beautiful move on Friday. 20.93 is next resistance.
SMH (Semiconductors) Tested and held support on the upward sloping 50 DMA.
XRT (Retail) Inside day. Watch for Friday’s low to hold and Friday’s high to clear.
IYT (Transportation) Inside day. Thursday’s low is an important level to hold. If that breaks, the low from the 10/22 gap should be next support.
IBB (Biotechnology) Thursday’s low is an important level to hold. 206.19 is the overhead 50 DMA.
IYR (Real Estate)Confirmed the bearish phase. 63.13 is support.
XHB (Homebuilders)30.00 now the support area to hold. Confirmed the warning phase.
GLDThese doji candles just prove that this has fallen out of favor to trade. Gapped lower to support.
USO (US Oil Fund) Perhaps a sign of deflation
XOP (Oil and Gas Exploration)Inside day on the 50 DMA. Watch which way the range breaks.
TBT (Ultrashort Lehman 20+ Year Treasuries) Gapped higher and is now in an unconfirmed Bull Phase.
UUP (Dollar Bull) Confirmed the phase change to Recovery.
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:
NEE Needs to clear R1, at 87.71. Good risk to the 10 DMA.
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)
AFL Watch for a breakout or reversal over 65.78. Good risk to the 10 DMA.
KOG Inside day and moved into an unconfirmed bull phase on Friday. Friday’s low is max risk.
DOW Moved into an unconfirmed warning phase on Friday. Watch for a breakout or reversal against the 50 DMA.
C Moved into an unconfirmed Bull Phase on Friday, which was also an Accumulation Day. Watch for a breakout of reversal against the 50 DMA.
CNX Watch for an Opening Range Reversal or a breakout against the 50 DMA.
HCAInside day on the 50 DMA. Watch for a breakout over 45.5o for a continued move up.
CXO Sitting on the converging 10 and 50 DMAs. Watch for a breakout or reversal with a good risk against the 50 DMA. Unconfirmed Bull Phase.
Category 4: (Rip Tide) N/A
Phase Change:
CCUR Like it over 7.49 for a swing. Confirmed it’s phase change to Recovery.
BTU If risk is in line, watch for a breakout over 20.99. Could see 23.25 area.
CVXInside day on three converging moving averages and just moved into an unconfirmed Bull Phase. Watch for a breakout over Thursday’s high.
CCJFriday was a bullish engulfing day. 18.75 looks like a good max risk.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
PAA Watch for a breakdown or OR high failure under the converging 10 and 50 DMAs. 47.85 is support.
PANW Watch for an OR high failure or breakdown under R1. 39.08 is potential support.
Category 6:N/A
