Argument for a trade long

charts, strategy

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.

 

Interesting overshoots

IBD

#IBDpartner

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.

Plan for the week

charts, IBD, strategy

#IBDPartner

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:

  1.  active traders look for oversold quick rallies
  2. active traders look for shorting into support/shorting breakdowns
  3. 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

 

 

 

Old man sour turn from froth, excess and good times

IBD, strategy

#IBDPartner

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

IBD 50 review

IBD

#IBDPartner

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