This is the question we would all like the answer to. Do we wedge and then correct or are we going to have another time consolidation like we have already seen this year multiple times? If I were a gambling man, I say we will likely correct via time (the wedge), and then go higher like we have all year long. Good thing I do not have to make that call yet though. Right now there are a couple of things we can do for our trading –
When the market is in a downtrend or a choppy wedge process you can focus on LESS correlated (or susceptible stocks) subjects like short squeezes or catalyst plays. An example of this would be $TSLA or new IPOs like $VOYA.
Obviously it is a good idea to treat each set up as it’s own trade idea but as a whole it is a good idea to keep in mind what the MAJORITY of stocks are doing and at this point they are navigating the new range and no real sector is tight enough to really put back on lot of size. A couple more days of sideways action and consolidation will likely set up a lot of charts for higher prices.
Some of the stocks we spoke about on the Week Ahead post were $EA and $ATVI and they both performed nicely today and look like they want higher prices.
$UNH showing some strength today and looks to be coming out of a nice base. Buy over today’s highs or let it bull flag out first. Nice set up.
Apple is still a relatively frustrating stock for most people. I would wait for a definitive breakout from resistance and some real movement in it at this point. There have been many Fakeouts and that looks as if it is going to continue for the near term.
Google is chopping around. I know some that took it out short but I do not see a great short set up yet. Let it break some trendlines and/or MAs and tighten up a little first before making any bearish calls on it.
Amazon has been a momentum failure recently. I do not see any really good set up in it right now BUT if it holds then 264 level in the coming few days maybe it will improve for the breakout. Still down trending in the channel though.
IBM – from a weekly perspective it needs some more time to develop a true pattern but looks as if it is consolidating sideways (through time) well. Something to continue to monitor.
HPQ – I know some that took this out long today for a swing. Versus the $24 level would be the least risk averse but really the major level is $23 – all depending on risk tolerance and timeframe. I am giving it some more time to consolidate. Does not seem ripe yet.
TSLA – KILLER stock, and an amazing move. This one just keeps on going… on and on… anyway, looks good. Looks higher. Would NOT short this one. I was long on Friday, sold on Friday – Missed today. Frustrating = yes. End of the world? No way, time to move on.
NFLX came into today and quickly showed some relative weakness and then quickly took out alot of support and finished down 6.31% on the day. There were MANY shortbale trades in this name intraday it is just a matter of timeframe.
BONDS (TLT) – Got killed and murdered today. Ugly action. I do not want to be long the bonds at all. Looks as if they are breaking some major support levels, the inverse ETF (which I would play) is called TBT and is a nice vehicle. Let it consolidate lower now before shorting. Not something I would chase down to the short side – can gap easily.
Gold (GLD) is still a broken commodity, not looking to go long it at all. However, I do believe it is getting a bit frothy down here on the short side. Leave it alone for now.
IYT formed a very distinct lower high today and looks as if it wants lower. Give it some time to consolidate though. Still in a long term uptrend but seeing a little rotation now and I would avoid until a clearer pattern develops.
K and GIS are both in the same sector and are really seeing some faulty signals up here. Looks as if they could come off the highs a little bit here. Testing their uptrend line a little too much for my liking. Stay away or maybe a cute short in there.
XLU was absolutely destroyed today. Something different. A major sector (other than metals) completely getting torn up. Holding below support and now continuing down. This was not a little shake out, looks like this was the real deal this time. Looks lower from here.
In summary, I am not seeing a ton of great patterns. Give it some more time. A couple to a few more days should do it to tighten up some charts and after that we will likely head higher IF the trend continues (likely will).
Have a good evening – I know this Daily Analysis was a bit longer than normal but I had some more time. Here are some charts –