Bullish Sector Breadth with Caution and Trending Stock Scan for April 14

Apr 14, 2014: 12:14 PM CST

While the broader US Stock Market rallies sharply off an inflection low today, the Sector Breadth performance sends caution signals despite broader bullish price action.

Let’s see what’s going on under the market and identify our key trending stocks for today’s session.

Despite across the board bullish price action where 90% of Dow Jones and S&P 500 stocks are higher in today’s session, take a close look at the bars in the sector performance grid.

As we’ve seen in prior “bearish sector money flow” updates such as April 11th, April 10th, and April 7th, we’re seeing the strongest sector performance – 100% of stocks in the sector positive right now – in Utilities ($XLU) and Energy ($XLE).

While the difference is small, the fact remains that Industrials ($XLI) and Financials ($XLF) join Health Care ($XLV) for the “least strong” sectors of today.

Again, we’re not seeing a huge non-confirmation, but money continues to concentrate itself in the defensive sectors, even on a day like today.

Speaking of bullish price action, here are potential bullish “Trend Day Continuation” candidates:

Teco Energy (TE), Slumberger (SLB), Allegheny Technologies (ATI which returns to our list), and Halliburton (HAL).

Our potential bearish trend day candidates include the following:

Carnival Corp (CCL), Pitney Boles (PBI), Intuitive Surgical (ISRG which also reappears, as I covered in an earlier educational blog post), and Bristol-Myers Squibb (BMY).

Unless we see another stellar intraday reversal, continue focusing on the relative weakness names and shorting them as the sell-off continues.

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Corey Rosenbloom, CMT
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April 11 Breakdown Sector Breadth and Trending Update

Apr 11, 2014: 12:35 PM CST

With the broader market breaking a key support level this morning, let’s take a quick look at mid-day Sector Breadth and view the results of our Trending Stock Scan candidates.

Here’s current Bearish/Breakdown Sector Breadth:

We’re seeing another clear example of Bearish Breadth where the strongest sector is Utilities ($XLU) followed by Energy ($XLE).

All other sector breadth readings show roughly 15% of each sector’s stocks are positive on the session.

In fact, 83% of all stocks in the S&P 500 are negative on the session mid-day.

This brings us to our bearish intraday trending stock candidates for additional short-selling opportunities:

Fastenal Co (FAST), Teradata Corp (TDC), Jacobs Engineering (JEC) and a stock I highlighted on Wednesday – Intuitive Surgical (“Gaps and Traps with Breaks and Fakes for ISRG“) top our downtrending list.

I was unable to find four clean uptrending stocks today, so I narrowed the list to these two:

If you simply can’t resist going against the trend of intraday money flow, then C.H. Robinson (CHRW) and ConocoPhillips (COP) are showing relative strength and intraday uptrends at the moment.

Unless we see another stellar intraday reversal, continue focusing on the relative weakness names and shorting them as the sell-off continues.

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Corey Rosenbloom, CMT
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Essential April Fibonacci Retracement Levels for Dow NASDAQ and SPX

Apr 11, 2014: 11:33 AM CST

With the US Equity Markets correcting lower against recent highs, let’s take a moment to update our short-term Fibonacci Retracement Reference levels and note something very interesting about how far the NASDAQ has fallen.

We’ll start with the S&P 500 levels:

SPX Fibonacci Retracement Trading levels

The S&P 500 is stair-stepping lower, starting with the 38.2% Fibonacci Retracement level which formed the lower bound of the recent rectangle pattern.

The recent breakdown under the 1,840 (1,837) reference level led immediately to a successful test of the midpoint or 50% level into 1,820.  Note the current intraday rally back to the underside of the 1,837 level.

The next short-sell trigger will be a breakdown event under 1,818.50 (target 1,800).  Keep these levels in mind.

Next, the levels in the Dow Jones Industrial Average are similar (in structure):

Dow Jones Fibonacci Reference Levels

With the pattern similar to the S&P 500, we’ll focus on the 16,145 level (38.2%) along with the current 16,000 confluence.

A failure or breakdown under 16,000 opens a quick sell-off (open air) pathway toward 15,850.

The most interesting chart – in comparison – is the NASDAQ Index:

NASDAQ COMPX COMPQ Fibonacci Retracement Reference Levels

We can use Fibonacci Retracement Levels to compare similar markets (or ETFs).

For example, while the S&P 500 and Dow Jones break the 38.2% and challenge the 50% or “midpoint” Fibonacci levels, the NASDAQ has already shattered the 61.8% level and almost retraced a full 100% to the prior low carved out in February.

Namely, we’ll be focusing on the “round number” 4,000 level.

Note how price has already stair-stepped each of the three main Fibonacci Levels (4,221, 4,175, then 4,130).

Bookmark this page and keep these reference levels handy when planning intraday or swing trades.

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Corey Rosenbloom, CMT
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April 10 Another Collapsing Breadth and Downtrending Stock Update

Apr 10, 2014: 12:25 PM CST

We’re seeing another sharp rotation of money flow out of stocks as seen by price itself and the rotation into defensive sectors again.

Let’s start with our mid-day Sector Breadth Grid to assess the damage (and opportunity):

If we go back to intraday updates from “April 7th Collapsing Breadth” along with “April 4th Reversal Day,” we’ll see a similar picture of relative strength concentrating in the “defensive” or Risk-Off Consumer Staples ($XLP) and especially Utilities ($XLU) sectors.

While it’s not stellar, 52% of S&P 500 Utility stocks and 43% of Staples stocks are positive mid-day.

Zero Materials stocks, two Industrial Stocks, one Health Care stock, and four Financials stocks are up at the moment.

This suggests we should continue focusing on the weakest performing stocks in the weakest sectors for short-selling (retracement or breakdown) intraday or swing opportunities as price continues to trade within the well-defined rectangle boundaries (earlier post update).

Potential short-sell retracement or “Trend Day” candidates to the downside include…

Zions Bankcorp (ZION), PNC Financial Services Group (PNC), former high-flyer Gilead Sciences (GILD), and Cabot Oil and Gas again (COG).

While I was tempted not to include any winning or bullish stock, here are potential candidates:

Hewlett-Packard (HPQ), McDonalds (MCD), IBM, and Chesapeake Energy (CHK)/

Unless we see another stellar intraday reversal, continue focusing on the relative weakness names and shorting them as the sell-off continues.

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Corey Rosenbloom, CMT
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Gaps and Traps with Breaks and Fakes for ISRG

Apr 9, 2014: 2:30 PM CST

Intuitive Surgical (ISRG) is the weakest performing stock today (largest percentage loser) in the S&P 500 which prompted me to investigate more about this stock and its chart.

A quick glance at the Daily Chart shows a “Break and Fake-out” situation along with a sudden reversal back to the breakout price.

Intuitive Surgical ISRG Breakout and Bull Trap Fake Reversal

April 1st triggered an opening gap breakout that would later devolve into a cruel April Fool’s joke with today’s larger gap-down being the punchline.

After three days of strong, impulsive price action away from the rectangle value area (highlighted), price reversed just as sharply to return back inside the pattern.

Let’s step inside the breakout and reversal to learn a quick lesson in real-time price monitoring:

ISRG Intraday Divergence Reversal Trap

The April 1st gap-up into the $500 per share level was met with a standard retracement and recovery play.

The next session saw an additional upside breakout above the $500 per share “round number” reference area that continued into the next trading day (April 3rd).

However, the closing price on April 3rd was the swing high ahead of a violent reversal and current collapse.

Note the quadruple swing (four price point) negative divergence as highlighted in both Volume and the 3/10 Momentum Oscillator (or any similar momentum oscillator).

Take a look at my earlier reference post with respect to broader Market Internals and reversal situations along with the earlier S&P 500 post that detailed the “vacant march to new highs” ahead of the reversal.

Apply the same logic to the current intraday and now daily chart of Intuitive Surgical (ISRG).

Ultimately, the re-break back under the $500 reference area triggered profit-taking from the bulls/buyers along with financial losses (stop-losses) from short-term buyers above the $500 level.

The result was a return back to “Value” and the current situation which calls either for a bounce up off the current $450 breakout level… or a failure to bounce which likely results in a retest of the lower trendline near $420 per share.

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Corey Rosenbloom, CMT
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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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