The last stand

Below is the weekly 200sma, the last stand of any major SMA support.   As you can see it’s been key now for the last 14 yrs.  In the last bear market (financial crisis) we stayed below for 2 years 2008-2010.    Last time we tested the actual line was in 2011 when price stayed on it for weeks before finally climbing back over until hitting it again today, seven years later.   Do note that as much as we  would like a magical bounce on it this week from past observations when price has used it as support (2004, beginning of 2005, 2011) it’s been somewhat messy affair that lasted weeks with a few weeks dipping just under.

Here is a close up of the last time the 200sma weekly hit in 2011 where we spent 9 weeks basing on it.  Two things to note:  1) there were three weeks it closed under, 2) but there were no continuation candles down.   Price refused to budge down for continuation follow through below the 200sma and finally bulls won and took it higher.

The best case scenario is that what happened in 2011 also happens in 2018-2019 where we bounce/hold on this level and climb back up.  Worst case scenario of course is another recession and prolonged bear market that lasts for example 2019-2021.    We expect at least some attempt at holding this zone, give or take 3-4% similar to 2011,  especially since we are so stretched to the downside when we hit it today after 8 sessions under the 9/20EMA on 60min time-frame.      Whether that holds or not though after any initial bounce is another story.   One step at a time.   For now enjoy the day off tomorrow and focus on the holidays, friends and family. We’ll see you Wednesday on the streams. HCPG

Low visibility but have a few plans

#IBDPartner

All bear markets we’ve experienced have had wicked rallies and it’s good to always have a plan in both directions in bear markets.

XLF 23 next target here — this one is a big one and we imagine at least there should be some type of hold/bounce there, dead cat or not.

QQQ 156 weekly lost today but market has until Friday close to get over.  Overshoot territory and then rally back to 156 definitely one potential plan.


SPY look how that descending 20EMA/60min served as a wall all the way today — lost short-term support but held the round 250 spot.

We went through our MarketSmith scans of the entire IBD 50 this evening and wow what technical damage across the board.  It’s going to be a long time before bulls can get any type of healing/constructive patterns on daily/weekly.   Even if we do bounce, dead cat bounces are usually V type bounces that still don’t set up conventional swing type entries.

Once market does stabilize, whenever that may be, we will look at the software names to take leadership and will likely see them populate the Near Pivot screens.

As for shorts– we never like shorting into the hole.  Sure if it’s Indy down intraday follow the trend down for a trade but for swing shorts probably wiser to look at resistance spots to short above than pressing down here with SPY QQQ IWM all under Bollinger Bands.

So what’s our favorite plan?  Get some panic and hit XLF 23 for a quick squeeze up past QQQ 156 by Friday close.   Very specific but hey just one potential plan.    Stay safe, and if you need to hear it just one more time, here it is: cash is a position.   See you on the streams.  HCPG


Santa rally?

Last night we responded to a question about the possibility of a headfake down thru 2600 on the E-mini:

We didn’t actually think it would happen– but it did, sort of, depending on your time-frame, with a break of 2600 and then 40 point rally up. 

We were focusing on SPY 260 so let’s stick with that for now:   when the 260 level broke we actually were still pretty bearish. Why? Because it was very orderly and financials were acting like death.  Our feeling was that we would go lower, led down by the banks.     We thought SPY 260 is nothing, let’s get QQQ to 156 and then think about a bounce.

Then one thing happened that changed our opinion and our positioning — and if you go through our tweets from 11:30 on you will see a complete turn around in terms of our focus.  The old school tech started firming up and taking leadership.  As we tweeted about it a half dozen times: for a while there it was financial anchor on tape pulling down, and tech trying to rally the market.  

Tech won the day and SPY closed green.   Our map for last little while has been the 9/20EMA on the 60min — if you recall we got long a basket on XLF 25 hold last Thursday which worked great until Friday morning when SPY hit 270 and the descending 20EMA on 60min and reversed hard.  

Note the rally last Thursday until 270/descending 20EMA which immediately reversed the tape.     Today’s rally is the second test on this EMA and the EMA is flatter so it has a better chance of breaking.  

We got our 263 and 265 short term targets met on SPY but still like the position long to see if we can get it over that 20EMA/60min.  If 260 goes all bets are off.    Same story for tomorrow– watch the financials vs tech contest.  If financials can firm up we could be in for a decent multi day rally. Big if, but that’s what you have to watch.

As for individual stock longs we have two one sector we like a lot and which we have blogged about, Enterprise Software and one stock, TSLA.

From the IBD50/MarketSmith scans you can see NOW PAYC ADBE TEAM ALRM VMW all in the IBD50.  Sector is holding up great but it needs a more stable tape — and once it gets that it could really rip.  Have these stocks front and center.   We consider these, for now, the new leaders of tech.   (#IBDPartner)


Take a look at NOW for example, IBD #8, and just set to go — just needs a less hysterical market.


And talking about old leaders — we just missed the AAPL buy (saw it a minute too late) today but do like this risk/reward potential:

So to conclude — we would feel better about the market if XLF can get over that 20EMA/60min resistance, and all bets are off if SPY loses 260 (1.5% away so decent risk/reward against that stop).

See you on the streams.

Still hot! Enterprise Software review

#IBDPartner

We’ve been talking on our streams about Enterprise Software a lot lately, especially since the correction because their relative strength has even been more impressive.  The group is up 28% YTD and clearly a leader group in the  hard hit tech sector.

Quick look at the group via a MarketSmith scan sorted via EPS rating:

 

WDAY just came out with excellent earnings and one of the clear leaders of the group.   We’re not in the stock and would not want to chase it up here but any basing in this 165 area would be constructive.

TWLO another clear leader near highs — quasi cup now needs a handle near 97-90 range.   Again, too much of a chase for us to jump on here.

PAYC just hit resistance near 136 (horizontal resistance, 100sma daily and 20sma weekly) and now needs some time to gnaw away at this congestion zone.  Basing at 136 would make this a very nice set-up.   And bearish case of course would be if it is spanked hard and reverses at this resistance area.

NOW good looking chart that also has stalled at 192 resistance — same theme you will see over and over in this sector.  Needs to set up a base without giving up too much of the rally to set up a new swing long.

CRM same thing — would love a base near 147 for a week.  Note also 20sma weekly resistance at this area.

Exact same thing ZEN — rally from weekly support to stall at congestion zone at 62.  Bullish case:  doesn’t give back too much (for example staying above 58-59) while creating a new base.

NTNX rally stalled immediately upon hitting descending 20sma weekly at 47– this one is weaker than the rest and has 200sma at 50.  Needs some work before it can tackle those areas.

COUP same thing — big V reversal from support (52) and now stalling at horizontal 70 resistance.

Buying at resistance after a big V reversal bottom usually NOT a good idea.   If the move is real it will likely base and create a new set-up/ solid risk-reward for a new buy.  If it’s a dead cat bounce then resistance will hold and it will immediately give up a good portion of the rally.  Clues to look for?  Pullback is mild and intraday as price does not move but buyers keep showing up after every little dip.

Tough to know whether market has really bottomed yet or not — the SPY 280 resistance should tell the tale in the next little while.   If the next move is higher though then put Enterprise Software on your radar.   See you on the streams. HCPG

 

Top 10 IBD bases plus one bonus

#IBDPartner

Volatile market continued last week but heading into Thanksgiving we are hoping that smaller ranges form.  If market can start churning in the upper part of the larger  range (SPY 260-280)  instead of heavy breadth days down and up then individual stocks can start breaking out with more success.

SPY is broken for now but if we enter a churn zone then we should be able to get off more individual trades that are not whipsawed up and down with the tape.  What’s needed for that?  More confident traders in a less nervous tape.

We found 10 IBD stocks that have potential (and one bonus!):  we are including fundamental information in the MarketSmith charts below (top left box) for the CANSLIM crowd.

ADBE #25 IBD holding onto 50sma weekly – over 255 and it could go.  Tech leadership is currently in chaos — can ADBE step into the power vacuum?

CDW #26 IBD holding very well in this tape, surprisingly so considering it is technology related.   Over 92 and things get interesting.

CTRE IBD #29 long base on weekly under 20.  On daily below you can see a small flag that is looking poised to be broken — 20 big kahuna breakout.

Zoom out to weekly on CTRE — you can see 20 is huge.

CYBR IBD #6  sold off from 84 highs but held the 50sma — any climb back over 77 would be bullish.

EEFT #23 IBD held the 50sma on the pullback — much better relative strength than the indices.  Trade is against that low (108) for any swing.   Great chart.

EW held 50sma weekly and now basing under 158 — add to radar.   IBD #37

 

FIVE is IBD #2 – held the 20sma weekly and now has to get back to near 126 to get momentum trader eyes on it again.   Great looking chart.

GDOT is IBD #27 — held the 50sma weekly and now needs to base near 90 as you can see from daily chart below.

HZNP is IBD #18 and has killer chart — look at the 50sma bounce on Thursday and follow through on Friday.

KL is IBD #19 – gold stock so expect some tricky trading — what we like to do on gold stocks is rather than buy breakouts, to look for pullbacks.   KL held the 50sma weekly last week and daily now needs follow through.  If you want to swing long here then stop is against 50sma weekly (18).

PLNT is IBD #13 held the 50sma daily on Monday — any new base near highs now would be bullish.

There you go: our favorite stocks from the IBD 50 list.   As stated above — if market can calm down, even if it does not go back into bull trend, then individual stocks can start making their own successful moves for swing traders versus the market the last few months where often stocks are getting crushed together in heavy breadth days.   See you on the streams.