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
Every week we look through our MarketSmith scans to look for new ideas — we go through Near Pivot scans daily and once a week we go through our IBD 50 list. We’re going to try to make this a weekly blog tradition.
The following are all patterns we’re interested in potentially trading. NFLX holding this base nicely — we were swing long this last week but it hit our trailing stop. We have no problem getting into a stock a second time after being stopped. No room for ego in this job.
NOW is inside MarketSmith’s own proprietary buy area which caught our attention:
Bounced on 20sma weekly and basing near highs. Gorgeous trend.
MTCH popular stock with momentum traders and we’ve added it to our watch-list. Held nicely on that 20sma but now needs to follow through up or could easily break down towards 50.
PANW in the hot software security sector and in the buy zone near the 50sma on daily.
Gorgeous trend on the stock and 20sma weekly comes in at 216 in case of pullback reversal trade. Just a note on how we trade pullbacks on longer term uptrends — we wait for buyers to show up and then pay up maybe a point or 1% on top of that. Support means nothing if buyers don’t show up — happy to catch the meat of trade and not take the risk that comes from trying to pick exact bottom.
NVDA probably the stock we feel one has to be most aggressive with in buying pullbacks. Loved stock — and acts great. Tested the 50sma last week near 265 and then rocketed higher — needs to base now to set up again.
MA another one of our favorite stocks — would love a pullback to get it near 210 on 20sma weekly. Add to radar in case of market weakness.
These are our favorite trading vehicles right now from the IBD 50 — hopefully we can keep this up every week and develop and improve this type of post with our readers. See you on the streams. HCPG
We’ve been waiting for a financial breakout now for a while — we were too early in the game. Finance isn’t like tech — it often needs more basing, more time. Are we seeing a rotation out of hot tech into old stodgy stocks (like the BA CMI we’ve been talking about?) Maybe. Let’s see how weekly closes on Friday but this sure does look like it is the one.
BRK.B we talked about in our last post — a beauty we found in MarketSmith Near Pivot scan
Full breakout mode here — old man stocks taking the baton from hot tech? Very well could be. Note lack of FB buyers on 160 — a major support — and AAPL failing 20sma again a second time as tells for big tech appetite waning.
XLF weekly — finally getting going.
Like this BAC potential swing with entry here at 31, stop on 30 break.
For tells — QQQ at 181 is a great one — if buyers don’t show up this could mean a longer rotation into Dow type and finance vs social media/old tech. Stay sharp!
In our job there’s one thing that never stops and that’s the hunt for new ideas. Over the years we’ve honed our mental recognition skills and now only need around 3 seconds to discern between a chart we instantly have potential interest in and a chart that is an instant pass.
What we like to do at least 3-4x a week is to go through MarketSmith’s G250 pattern recognition stocks, in slide mode, timer on 3 seconds. As soon as a name interests us we write it down without pausing slide. Once we’ve gone through the scan (also use this for our favorite Near Pivot) we take a closer look at the names we have jotted down and do another cleanse.
Here are a few ideas for your lists:
NVDA was on our newsletter last night for trend-line break and doing well today. We liked how it held the 20sma and then set up a trend-line break.
LULU high level base here — add this to your watch-list for a move to 160 hopefully soon or even better if she pulls back to that green line (20sma)
BRK.B fantastic longer term base here that breaks out over 217
BA we like this pattern — all these notes on chart are done via MarketSmith automatically. Over 364.5 gets interesting.
PGR just adding to show what a nice quick trade that pullback to ascending 20sma would have been — we didn’t see this on time last week to have participated.
IDXX nice hold on the 50sma — looking for a move back to highs.
And MSCI which we talked about in our stream last night — what an incredible trend. Why haven’t we been long this stock? As Howard Lindzon says, “it’s all about data”. We missed the latest entry on the pullback to the 20sma. We won’t miss the next one.
See you on the streams. HCPG