The warning phase continues to accelerate at the same time as the oversold conditions. And of course, typical of the market, there are pockets that are on their own. For example, Chinese stocks have been getting slammed this week. I have been recommending short BIDU and SINA since 2 weeks ago. And then there are the ones that are rallying regardless of the selling pressure such as WPI. But do not despair, nothing lasts forever and while we churn around in this warning phase, keeping positions small and looking at the individual setup of each stock or ETF and knowing your specific risk and reward will pay off. With that said, this is the most oversold the market has been in about a year. With the volatility so low, people are expecting a panic sell off and flush. But, it is equally possible that instead, we will see a huge rally. That does not necessarily mean a prediction for new highs or resumption of a bullish trend, but for the meantime could mean an opportunity to catch some momentum on stronger setups.
SPY** is not only oversold, but also had a distribution day in volume. However, since we've been watching the exponential moving averages as featured in today's video on all of the indexes, this one basically touched the 160 day exponential moving average at 128.08 with its low today of 128.18. Quite simply, we could use a move over the floor trader pivot now that we have traded beneath it for six days as an indication to buy with a stop underneath the exponential moving average for a low risk trade. The FTP comes in tomorrow at 128.60.
QQQ the identical situation with the exponential moving average at 55.34 and today's low 55.23, the FTP coming in tomorrow at 55.46.
IWM exponential moving average at 78.94, today's low 78.71 and the floor trader pivot tomorrow at 79.10. The only one that hasn't quite reached the exponential moving average is DIA. But, of the indexes, this would be the one I'd be least concerned about especially since it too is oversold.
ETF's:
GLD** has now given us two days under the floor trader pivot plus it traded beneath yet closed above the 10 day moving average at 149.65 with today's low 149.30. The FTP comes in tomorrow it 149.84. I will be looking to enter a long position depending on how it opens using today's low as a risk still in anticipation that this can move up to 155 and beyond.
I went home short IYR, but with all of the support down at 60, I will watch how that opens and use an initial stop loss over 61.08 the 10 day moving average. But, if it breaks down beneath 60 I will stay short for a mini to swing trade in anticipation of it going to 58 as the first target.
XLE recovered somewhat today but still has an overall weak chart formation with price action beneath the 50 and the 10 day moving averages. Today's candle interestingly enough is a DOJI plus we had an inside day. Therefore, tomorrow should be pretty decisive as to the next direction in this ETF. A break beneath 73.40, the recent low and I would anticipate some more selling, above 75.20 some short covering.
USO the featured pick from two days ago, rallied above the 10 day moving average and back above the 160 day exponential moving average. Now, look to see what happens at 40.75 next area of resistance and wait for another opportunity to see if it will indeed rollover and eventually break down beneath the 200 day moving average.
IBB has the very same toppy looking formation as we've been seeing in some of the other stocks and ETF's and skimming along the 50 day moving average which is still pointing up. The activity of the last three days is starting to look a little bit like a potential bear flag which means that unless this can get back through 107 where the 10 day moving average is and begins to rollover breaking the 50 day moving average at 105.53, we could see a further correction in biotechnology.
SMH looks identical to the three indexes in that today it tested the exponential moving average at 33.55 with today's low 33.48. Although this is not quite as oversold as the indexes, it does have bounce potential if it clears first the floor trader pivot at 33.72 and then R1 at 33.97.
To reiterate, any trade off of the exponential moving average is a trade looking for a bounce and at most a mini swing trade. Overall, if we can get a decent rally, then I will begin to look for indications of fresh rollovers and new opportunities to go short as I interpret the accelerating warning phase at least over the intermediate term, a signal that we still have lower prices in store.
Picks:
The list is more extensive than usual which is typical after a period of low volatility. Make sure that you narrow your focus to a couple longs and a couple of shorts with the best risk reward potential.
VHC**I went home long after initially breaking discipline and getting stopped out on the opening range reversal by not risking the full one third ATR. I then proceeded to buy it back the second time it had the opening range reversal. What I like about this chart, is that it is still in a strong condition and today, held the 10 day moving average at 25.89 with today's low 25.76. Therefore, I took this home for a mini swing trade and will use the swing low from last week at 25.65 now as my risk which gives me less than a half of an ATR exposure and the possibility of a rally at least back up to the recent high at 30.50 and possibly beyond. day to swing.
BBBY*had an inside day today and popped back through the 70 day exponential moving average at 52.48 with today's low 52.16. The 10 day moving average comes in 52.94. On the daily chart, this is still holding its gap that was left on April 7. Therefore, if it closes back above the 10 day moving average although we have overhead resistance at the 50 day at 54.01, there is also a trendline coming down from the all-time high that was made on April 27 which would then cross giving it the possibility of a rally up to the recent high at 57.90.Day to mini
WLT held the 160 day exponential moving average today and had an inside day. 116.97 is the number that has to hold and even though I'm including this on the long list, this is a good potential for a short as well. To go long I would have to see a break 120.50 the 10 day moving average and to go short, the exponential moving average in anticipation of the move down to 111.54 where the 200 day moving average is. Day to mini
FMCN*another oversold stock that's hovering at the 160 day exponential moving average at 27.87. With four days under the floor trader pivot, that comes in tomorrow and 27.92 just above the exponential moving average which gives you a good place to buy using today's low 27.22 as a risk. Overhead resistance at the 10 day moving average 30.22 which makes this a good day to mini swing trade for a pop. The weekly chart shows that the 50 crossed over the 200 a couple weeks ago when the price was much higher. Therefore, those who are more patient provided you use trailing stops, could play this out for a possible swing against the 200 day moving average at 26.27 with a cheap entry over the FTP tomorrow. Day to swing.
PVH today this fell to the 200 day moving average at 62.27 with today's low 62 and then closed above. Still has a shot with an upward sloping 50 day moving average now way overhead. The weekly chart shows recent support around 62.20 right near today's low. This has the FTP tomorrow at 62.81 which is a good point of reference with a stop under today's low for at least a day trade, and possibly a swing if it closes well.
WTW**has come off hard ever since making new all time highs on May 26 at 86.97. Today it tested and held the 70 day exponential moving average at 71.35 with today's low 70.69. Has eight days under the floor trader pivot making it quite oversold. Tomorrow the FTP is at 72 which means most likely, it will open above it. If that is the case you can use the 70 day exponential at 71.35 as a risk or depending on where it opens, today's low. Looking for a bounce first up to 76.80 where the upward sloping 50 day moving average is. Again, considering this is still holding the gap from back in February, those with patience can hold on using trailing stops for a swing trade. Day to swing.
CRM now has four days under the floor trader pivot which comes in tomorrow at 140.39. Today's low was very close to a test of the 50 day moving average at 137.27. Could try buying over the FTP and using today's low or the 50 day moving average as a stop depending on whether it's a mini or swing trade. Overhead resistance at 147.22 where the 10 day moving average is. Better resistance up at 151. CRM has filled the gap which takes some of the wind out of the sails. Therefore, recommending for Day trade and possibly mini swing if the market firms.
NFLX**now has three days under the floor trader pivot which comes in tomorrow at 262.06. On the dip would buy if it retraces to 255 the old high from April. Otherwise, can take a small position over the FTP and use today's low 258.50 as a risk. Must clear 266, the 10 day moving average to keep going higher. Day to swing
WPI**Geoff found this stock today which is very close to the all time high made June 1 at 64.74 with today's high 64.69. I have been reluctant to buy new highs while the market is in its warning phase, but if you get a good risk above 64.74, then can trade for at least a day trade and possibly a mini swing trade. On the weekly chart, the Bollinger band is rising which right now comes in at around 65.60. That would give you half an ATR and then you could go to a no loss stop and see if it has more, especially if the market firms. And of course, with positive pivots watch for an opening range reversal. Day to mini
GMCR*now oversold after making new all time highs on May 27 at 83.75. Has seven days under the floor trader pivot which comes in tomorrow at 76.29 giving you a good risk to today's low 75.47. Some overhead resistance at the 10 day moving average at 79.85, but if the market firms this could easily keep going. Day to swing.
In consolidation and could be poised to go either way: SLB JOYG, GOOG
Shorts:
NTES**has two inside days in a row and is resting right on the 200 day moving average at 42.44. Today's low was 42.35 which means it is a short beneath today's low with a risk to either above the exponential moving average at 43.94 or today's high 43.42. Has underlying support around 39.70, with better support down near 35. Since it is also possible to perceive this as holding the 200 day moving average, with the two inside days, if it trades back above today's high, you might even consider buying with the risk down to today's low. The only reason why I recommend that possibility is because the weekly chart still has a bullish formation on the basis of its weekly moving averages and is showing oversold. Day to mini.
AMZN including this on the short list because it has tried for three days and yet failed to get back above the 50 day moving average at 190.46. If it gets above the number I would not go short. But, if it starts to roll over breaking the exponential moving average at 187.43 then you could have a short opportunity using today's high 189.81 as a near-term risk. Has some support at 185 which was Monday's low, but if it breaks down under that looks like it could go to 180.75 and possibly even down to the exponential moving average at 176.86.Day to mini.
FTO similar looking chart to Amazon in that it is trading beneath the 10 and the 50 day moving averages but holding on to the 70 day exponential at 27.18 with the possibility of a bear flag forming. Unless this clears 28.65 to the upside, if it begins to roll over and take out the exponential moving average have a short potential looking for a move initially down to 24.40 with support down around 22. Lately, I've also found it helpful on stocks that are looking weak to check the FTP in the morning as resistance. 27.77 is the FTP. Day to mini.
Continue to watch PRU, PNC for a breakdown under the 200 day moving average. MGA for breakdown under today's low 45.90. APA with a similar looking chart formation to NTES and AMZN.
Goodnight!