Most of the stocks we follow are being whipsawed around with the market up and down as SPY carves out a range between 260-280. Understandably old man stocks such as CLX MCD UNH AET, are offering some refuge, but one sector with decent growth that is standing its ground is select retail. We’ll focus on a few here found in our MarketSmith scans— Apparel, and Discount stores.
TJX BURL FIVE OLLI DG
BURL, Earnings out Nov 19, high base in the mid 170s. Could be good for a trade if it can show some relative strength 175+– add to list for potential breakout.
TJX, Earnings out Nov 20, making a base under 56. Both BURL and TJX could be in play next week post earnings — worth having on radar.
DG earnings out Dec 05, IBD #33. Already run up some ways but any further basing would catch our interest.
FIVE Earnings out Dec 05, IBD #2, sitting on 50sma right now. Continuation move up and towards 126 would get us interested. Do or die pattern here with a move below 121 hurting it technically on daily (while on weekly has some support at 114)
OLLI Earnings out Dec 06 move towards 94 would catch trend-traders eye — treading water right now.
Tough tape right now. As we wrote this morning the first test to horizontal support at SPY 260 was relatively easy buy and selling it into 280 resistance was again pretty clear technically. But now in the middle things get murky. As our newsletter subscribers know we sold our swing basket last Thursday at resistance and have not taken any new positions as of yet. We’re always looking for lower hanging fruits and right now can’t find any. There will be more clear risk/reward scenarios — today is not one of them. See you on the streams.
In our weekend newsletter we hammered down on one point : market had broken thru major moving averages and now was overshooting into horizontal support.
This was true of SPY IWM SMH XLF. We bought all four today in a basket and will swing — our first swing long in many sessions.
Several of our numbers (like SPY 260 outlined in Sunday newsletter) actually hit yesterday but it happened so late in the day that we decided not to swing. Today was less harried and chill and it wasn’t tough to get long.
SPY 260 horizontal support
XLF 25 horizontal support
IWM 145 horizontal support
SMH 88 horizontal support.
To quote our Sunday newsletter “You see the theme? Major moving averages have broken without a whimper, and now we are at major horizontal support levels . ”
As an additional boost — IWM is about to break the sour spot:
Stocks are poised — now all we need is the follow through. Our stops are tight — not going to give this that much room. If it wants to go, next few days a good time. AAPL earnings out Thursday will definitely be a factor.
See you on the streams.
We spent a lot of time scanning through stocks on our MarketSmith platform and we saw an interesting pattern. Leading stocks have broken major moving averages but now are sitting on/approaching major horizontal support — basically an overshoot into support.
FFTY huge monthly break of 20sma but now sitting on the important 30 level. Even if you don’t trade FFTY add it to your radar as a tell of momentum stocks (with IBD50 often being a leading indicator of growth).
Are we all going to be shopping at Walmart? Is this a sign of what is to come? Hope not but chart looks great while trending higher near 100.
AAPL earnings out Thursday — so far caught in a box of horizontal price. This will definitely be a mover and shaker — happy to go light or completely in cash into this event.
IWM another great example of what we are talking about — we have major break of moving averages but now at horizontal support near 145.
Remember in bear trends support means nothing without confirmation. It’s not worth trying to bottom pick: wait for buyers to show up before committing money. Signs to look for: a) good news is not sold and more importantly b) bad news is bought. See you on the streams.
Our best guess is that market is not going back to highs anytime soon — our favorite momentum/growth stocks have been clobbered bloody and the technical damage is not going to be healed easily. So we need to be ready for a few things according to different time frames:
- active traders look for oversold quick rallies
- active traders look for shorting into support/shorting breakdowns
- swing trades in new defensive leaders
While SPY was flat on Friday one of the best tells for momentum was down almost 3%. FFTY, the IBD50 ETF sitting on 20SMA on monthly. Huge spot.
IWM same thing — let’s see how the rest of October plays out.
SMH also sitting on 20sma monthly — our favorite canary in coal mine ETFs (FFTY IWM SMH) all sitting on pivotal support.
We’re trying to prepare for different potential scenarios, including #3: defensive stock longs.
We looked through some ideas from our MarketSmith scans this week:
Our favorite 6 all look good but need a bit of time to set-up — we’ll have them in our newsletter when the time comes.
ANTM a bit more basing near 280 would do the trick.
AWR big move last week (for this stock) — slow but strong. Would like some basing near 62
CHD solid bounce from 56 support — now needs to sit and set up a handle near 60
CLX back to highs and we like it here near 152 — again, big move last week and would love to see some basing.
FE new highs — would love a few day pullback under 39.
All the above had big moves last week and for our type of trading — need some basing before we would jump on. We would prefer to trade a NFLX over a utility stock any day but you have to do what you have to do! See you on the streams. HCPG
Growth names/ IBD 50 under pressure and MarketSmith’s Near Pivot scans full of stodgy defensive stocks like transportation, aerospace, oil and gas. Yikes. Is this the bond pivot-new norm? Hope not but as traders we have to be ready for the twists and turns of the profession.
IBD50 own fund FFTY to us is important enough to always keep on watch-list. Finding support on the 40sma weekly (the default SMA on MarketSmith) but for this picture to stay intact buyers need to step in pronto.
Instead of trading high beta growth names do we have to trade CSX type stocks now? Maybe. Nice base here as you can see breaks out thru 76
SYK gorgeous trend that breaks out 180
IWM, similar to FFTY, sitting on 40sma weekly. We always think of IWM as the canary in the coal mine ETF which often leads the way. If bulls want to keep the trend intact this is a good time to make an appearance.
There’s always ways to make money in the stock market but there are easier ways (high growth beta names which follow the momentum script more readily) and more difficult ways (stocks which have higher chances of head-faking/chopping thus making them more painful to swing– oil stocks being good examples). Key to staying alive in this business and being consistent is to adapt. It’s too early to tell whether this is it and we’re in for a more defensive nature stock market but at least be aware of such possibility and do your homework. See you on the streams. HCPG