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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Bounce Continues for April 9 Sector Breadth and Trending Stock Update

Apr 9, 2014: 12:20 PM CST

Well that was a relief!  Price continued to rally up off the key support level and parallel trendline structure (see yesterday’s Triple Index Update for key reference levels) and we’re seeing a return to short-term bullish money flow.

Let’s start with our current mid-day S&P 500 Sector Breadth Chart:

Unlike yesterday’s clear bearish sector money flow, we’re seeing reversal where strength is concentrated in Materials ($XLB) and Industrials ($XLI).

In the Materials sector, Allegheny Technologies (ATI) and Alcoa (AA) top the list.

For Industrials, Raytheon (RTN), Delta Airlines (DAL), Parker-Hannifin (PH), and Southwest Airlines (LUV) compete for the top spot.

Now, let’s turn to our potential trend day continuation candidates:

AutoNation (AN), Merck (MRK), previously mentioned Allegheny Tech (ATI) and Travelers (TRV) top the scan.

For our downtrending candidates, Lorrilard (LO), Kraft Foods (KFT), Diamond Offshore (DO), and Hershey (HSY – which was an intraday downtrender yesterday) rise to the top of the “downtrending” stock scan.

As always, monitor sector breadth with intraday trend and the potential for these stocks to continue their current trends, or reverse them (depending on the type of strategy you prefer as a trader).

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Corey Rosenbloom, CMT
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April 8 Reversal Sector Breadth and Trending Stock Scan

Apr 8, 2014: 12:19 PM CST

With a sudden reversal off expected support in the S&P 500, let’s dig a little deeper and study sector breadth and update our potential trend-day trading stocks for the remainder of the session.

We’ll start with S&P 500 Sector Breadth:

While Utilities remain the #1 Sector so far, Energy trails closely behind.

Unlike yesterday’s “Clear Bearish” sector update, we see broader strength and most sectors (except Health Care) trading above or just under (Financials) the 50% mark (meaning 50% or more of stocks in the sector are postiive at the moment).

Let’s turn now to potential bullish trend day trading stocks from our relative strength scan:

Bullish Trend Day candidates include Estee Lauder (EL), Philip Morris Intl (PM), N-Vidia Corp (NVDA), and John Deer & Co (DE).

Bearish Trend Day trading candidates include Dr. Pepper/Snapple Group (DPS), Dow component AT&T (T), Walgreen Co (WAG), and candymaker The Hershey Company (HSY).

As always, monitor sector breadth with intraday trend and the potential for these stocks to continue their current trends, or reverse them (depending on the type of strategy you prefer as a trader).

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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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Traps Trendlines and Current Reference Levels for US Equity Futures

Apr 8, 2014: 10:27 AM CST

After a Bull Trap outcome sent equity prices back to the lower support boundary, let’s take a moment to update the key levels to watch in the US Equity Markets.

We’ll start with the S&P 500 and will use the futures contracts for our reference levels:

S&P 500 @ES Futures Range Rectangle Reference Bull Trap Levels

For simplicity, this post will focus on the key “Upper Resistance (red), Lower Support (green) and Midpoint Value Areas.”

For now, the S&P 500 is playing up off the 1,830/1,385 lower support level potentially toward the midpoint near 1,855.

We’ll frame the next likely swing as one “up off” support toward Midpoint Value… or else a continuation of the sell-swing and ejection of price down through lower support.

Clear Bull Traps developed in both the S&P 500 and Dow Jones Index last week:

Dow Mini Futures @YM Range Reference Rectangle Bull Trap

For the Dow Jones @YM Mini-Futures Contract, the simple upper resistance level trades into 16,400 while lower support overlaps 16,100.

Price is currently playing up off 16,100 toward the Midpoint Value near 16,250.

With reference to the Bull Trap, see my post last week with respect to “Divergent Market Internals at the Highs” and the follow-up post yesterday “A Study Lesson on Lengthy Market Internal Divergences and Reversals.”

You can find an additional resource on the concept of “Traps and How to Trade Them.

Finally, the NASDAQ chart creates a different picture – that of a Falling Parallel Trendline Channel:

NASDAQ futures @NQ Trade Planning Range Reference Levels

Price currently is playin gup off the 3,500/3,490 reference level potentially toward the 3,560 “Falling Value” Midpoint area.

Upper resistance is declining and currently intersects the 3,660 level.

Use these charts – and the ‘trap outcome’ lessons – for planning and trading as long as the range continues.

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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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