Three Suddenly Strong Stocks to Study

May 27, 2015: 11:43 AM CST

During recent stock scans, I came across three “Suddenly Strong” stocks I wanted to share with you.

These stocks recently surged to the top of the scanning charts due to recent breakouts in strong uptrends.

We’ll start with a familiar name, Netflix (NFLX):

The main reason for this scan is to find strong uptrending stocks that recently enjoyed a breakout impulse.

While we probably don’t want to jump in immediately into these names, we may want to hold on to them on a watchlist to buy on pullbacks.

Netflix (NFLX) actually enjoyed two upside break-away gaps where price continued trading higher.

Both gaps saw initial upside action and a small, flat pullback (trade entry) before surging higher.

We’re seeing another small gap up above $600 and a current pullback/sideways range near $620.

Should Netflix strengthen with another breakout, it would be a buy candidate (or on a pullback toward $600).

I just released a new “Trend Trader’s Perfect Pullback” Lesson Bundle you may find helpful for studying retracement strategies. Continue Reading…

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A Quick Lesson in Trading Reversals from Support with Divergences

May 27, 2015: 10:09 AM CST

One of my all-time favorite trade set-ups is the play into higher timeframe support with a clear lower timeframe positive divergence.

Let’s unpack these terms, see it as it developed yesterday in the S&P 500, and apply this lesson to future opportunities to trade aggressive intraday reversals (the same logic would apply to any stock or ETF).

Before looking at today’s lesson, be sure to view yesterday’s “Breakdown S&P 500 Market Update and Trending Stock Scan” (which I write each day).

Here’s the quote from yesterday’s update:

“The movement away from 2,130 set in motion today’s fall toward the 2,100 simple target we’ve been discussing.

At this point, the market has achieved a key downside target (2,100) on intraday positive divergences so we’ll be on guard for a bounce up off 2,100.”

With that in mind – “key downside target on intraday positive divergences” – let’s see exactly what happened:

Note the positive divergence – it simply means that price is making lower lows at the same time a momentum oscillator is making higher lows.

It’s a visual conflict or “non-confirmation” that suggests a likely reversal (instead of price continuing lower).

Indeed – note the “R” and green highlight which reflects a very aggressive reversal opportunity. Continue Reading…

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Breakdown Stock Scan and Trend Day Market Update May 26

May 26, 2015: 1:12 PM CST

We’re finally seeing some action in the market after a flat, range-bound, divergent, false breakout event last week.

Take a look at this morning’s post on the expected breakdown event.

Let’s take a look at the current picture and plan the next step:

Today’s session officially springs a Bull Trap which (hopefully) didn’t come as a surprise.

Odds were much higher for a reversal scenario like we’re seeing as opposed to the market being held-up at the highs with duct tape as negative divergences extended.

The movement away from 2,130 set in motion today’s fall toward the 2,100 simple target we’ve been discussing.

At this point, the market has achieved a key downside target (2,100) on intraday positive divergences so we’ll be on guard for a bounce up off 2,100.

Otherwise, we’ll continue a short-term campaign of short-selling the market as it trades down away from 2,100.

Continue Reading…

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Four Market Money Flow Update on Today’s Big Move

May 26, 2015: 10:19 AM CST

The US Stock Market sell-off isn’t the only big money flow event happening today.

Gold similarly is collapsing, oil is falling while the US Dollar Index breaks higher into strength.

Let’s step inside the market as we start the holiday week and pinpoint what’s happening:

As I’ve been highlighting on the blog and to Members, this rally and breakout was FAR more likely to result in a BULL TRAP as opposed to a true, impulsive breakout.

First, take a quick glance at the “Key Make-Or-Break Level for the US Dollar” update I wrote yesterday.

As I highlighted to the Membership (join us for daily and in-depth weekend actionable planning like this), the Dollar was likely to break higher into “Open Air” if it could hold above the $96.00 pivot which it did.

Today we’re seeing the index extend the gains while at the same time putting pressure on commodities.

We’re seeing these exact swings taking place, rallying the Dollar up off the $93.50 support target (with positive divergences) at the same time gold trades down against resistance on negative divergences.

Oil joins stocks in declining further during today’s morning session.

Even if you don’t trade these specific markets, keep tabs on cross-market money flow with regard to “Risk-On” and “Risk-Off” behavior (we’re seeing Risk-Off dominate today’s session).

Continue Reading…

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Overdue Retracement Triggers in US Stock Market

May 26, 2015: 9:31 AM CST

We’ve been waiting for this moment as the market crept to new highs on massive divergences – odds were extremely high for exactly the sharp sell-off swing we’re seeing now.

Let’s step inside the market as we start the holiday week and pinpoint what’s happening:

As I’ve been highlighting on the blog and to Members, this rally and breakout was FAR more likely to result in a BULL TRAP as opposed to a true, impulsive breakout.

After a few days too long of being held up at the highs, gravity finally took over and price fell lower away from the 2,130 level as indicators and probability strongly suggested.

In the chart above, we see the S&P 500 @ES E-Mini Futures contract with NYSE Breadth – Advancing Stocks minus Declining Stocks.

Generally you want to see a breakout be confirmed with an increase in volume and internals (such as Breadth) – if so, it increases the odds that the breakout will succeed and we can profit from a breakout price impulse.

If, however, price breaks out but nothing else pushes to new highs… and indicators form lower highs (divergences), it increases the odds that the breakout will fail and a “trap” will play out to the downside.

Today’s session unhinged the market from the highs, and we’re seeing the initial sell-swing take price back under the breakout level (2,114).

Price is in a movement “down away from” the prior high and the prior breakout level and our trading strategies will reflect this new – expected – development. Continue Reading…

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