I’ve been mentioning that for a couple weeks now and still seems to be a reasonable strategy providing the “lower end” doesn’t break.

Last week I posted this chart of the S&P 500.

Then I said “1360 is really the key support level to watch, but it would not surprise me to see it breached at some point during the week with 1340 being the next level to watch.”

We spent most of the week chopping around in the lower end of that range and the actual low on the SPX was 1343. As you see on the chart below 1360 turned out to be about the “median point” of the week.

Here’s where we are now.

Next week will be interesting. The market could still easily test the range between 1330 and 1340 where I have the lower “zone” drawn.

But I think we are actually setting up for a bounce…

From what I see, the market looks ready to retrace back to around the 1380 area, maybe even higher.

The nice thing about buying the lower end of the range is that you can use fairly tight stops. If for some reason I’m wrong and the market starts really breaking down here, all you have to do is set the stop just under the lower-end of the range, say at 1325.

This Friday is OPEX and the Facebook IPO, so it should be an exciting week heading into that.

Earnings season is winding down, but there are still some set to report so be careful. For the most part this earnings season has been full of landmines. It seems like for every one stock that reacted well to earnings and gapped up, four got hammered. Even the ones that gapped way up after the release tended to drift right back down. There just hasn’t been a lot of follow-through to the upside even on stocks that got a pop.

It’s been a very tough environment. Like I said going into last week… “Sometimes not losing money by staying on the sidelines is the best strategy.” While this past week really wasn’t that terrible, as you can see on the chart above and on most charts, that it really wasn’t the type of market where a lot of money was made. Just a lot of chopping around in the lower end of the range.

While I still think the S&P is likely to trade down to 1290-1300 before Autumn (see the dashed line on the chart above), this week I’m expecting a “tradeable bounce” as I mentioned.

However I am keenly aware of the Macro issues and the problems in Europe, so any “out of the ordinary” news item can send this market into the “waterfall selloff” I have mentioned. So while I think we will try some swing trades this week, be prepared to “abandon ship” should things start to sink quickly.

Here are some stocks to watch on the daily charts (notes on the charts).

This week I will be posting some new Trade Plans, so be sure to check the waiting page each morning.

Honestly last week I spent more time working on the new version of the Research Lab than I did trying to find good trade setups, mostly because of the environment.

I am happy to announce that “all systems are go” and the new version of the Research Lab will be live on Monday, June 4th.

This is a huge upgrade and paves the way for all sorts of other nifty features and enhancements.

The great thing about how we build software these days is that you won’t have to do anything to upgrade – we are upgrading it for you and you will simply log in as normal from the new page that will magically appear before your eyes in a few weeks.

In the meantime I think we might have a few opportunities for trades this week but we still want to be careful. We are still in defensive mode overall.

One last thing I want to mention should be pretty obvious, but bears repeating:

Don’t forget to sell when you have a profit…

I don’t think we are in a buy and hold environment so the trick is to catch a trade and look for the exit as quickly as possible. In this environment, profits can disappear quickly so don’t be afraid to take them when you have them.

Be sure to join us Monday morning on the live broadcast in the Research Lab.

I’m expecting this week to be better than last….

Well we tested the upper-end for about an hour on Tuesday hitting 1415, then it rolled right back over and kept rolling.

Last week was the worst week for the indexes all year with the S&P losing about 2.4%. Under the surface many stocks didn’t fair nearly as well and were crushed.

Make no mistake it was a terrible tape all week, save the short-lived rally Tuesday morning.

The 15-minute chart of the S&P shows a clear head and shoulders pattern and the break down through the neckline.

It actually broke down late Thursday, but it seemed that everyone was reserving judgment until the jobs numbers Friday, which clearly disappointed. The market gapped down and faded all day. The last candle of the day was pretty ugly too…

So going into this week I think the best course of action is to stand aside and see if we get follow-through selling for a day or two. Perhaps we will get some sort of capitulation and then reversal. We will soon be hitting oversold territory, at least in the short-term.

Here’s a daily chart showing the areas to watch for a potential bounce.

1360 is really the key support level to watch, but it would not surprise me to see it breached at some point during the week with 1340 being the next level to watch.

While it is possible we get a “waterfall selloff”, I would expect a bounce, perhaps a significant one if we reach the 1340 area, where I have drawn a new upward-sloping trendline.

I have adjusted the lower end  of my trend channel, which should provide some support if we test it over the next week or two.

However, based on looking through at least a thousand charts this weekend, I think the odds favor a continued selloff with bounces here and there.

Since the market was not able to make a new high when it got “very close” last week I am going on the assumption that it has peaked for the time being.

This is kind of an ugly turn of events because I was actually trying to be a bit optimistic going into the week since we were so close to the high that it could have gone either way.

But the clear distribution we saw on Thursday and Friday are not to be ignored…

The near-term bias is down and I want to be extremely defensive.

I see so many stocks that broke trendlines last week, lost the 50-day moving averages and many that just plain got hammered.

Nothing is safe in this environment. Even stocks that had ordinary, constructive pullbacks, then based and turned up, rolled over and took out previous lows. This is the type of price action that should make you run for the sidelines and I’m seeing it all over the place in all different sectors. As I’ve been mentioning for weeks here, the indexes were not really representative of what was going on under the surface. There are many leaders that are just starting to roll over, so I don’t think we are anywhere near the eventual low. We probably have a few difficult trading months ahead of us.

I hate to say this but a simple 38.2 Fib retracement of this last move from the December low to the recent high takes the S&P back to about 1290, which happens to coincide with the highs at the end of October. That’s where I expect we are heading over the medium-term.

I don’t really expect it to be straight down at all and I think we get some oversold bounces along the way in the areas indicated on the chart above. But barring some sort of QE3 miracle, I think 1290-1300 is in the cards. We’ll have to re-evaluate the situation there.

A 50% retracement of the move puts us at about 1250. By the way I’m really not a hard-core Fibonacci indicator guy, but when it comes to downside targets for retracements on the indexes, it’s one of the best guides there are.

So what to do in this environment?

Well..there are a few things that I think are appropriate when we switch to “defensive mode”.

One is that we trade smaller size. If your stop placement would typically draw down 2% of your portfolio, you might go 1/2 size so you are only risking 1% on any trade.

In this type of environment you almost have to expect to get stopped out and make sure you are comfortable with that before you take any trade.

Another trick I use in this type of market is to look for stocks that are way oversold and try to catch the “panic low” on an intra-day spike down. It’s on a case by case basis, but we are likely to see certain stocks that get “flushed” intra-day and then recover. Sometimes they are good to hold overnight and sell the next day. But this is tricky and the entries should be based on 5-minute charts and stops are critical.

I will say that intra-day trades and 1-2 day timeframes are one other way to trade defensively. It’s hard to expect “a few days to a few weeks” holding period will favor long swing trades.

Lastly, one of the best “defensive” trading strategies I use it to trade a lot less often. I will spend a lot of time watching but be much less inclined to jump in anything unless I see just the right conditions and setups. Even then I won’t really trust the follow-through and will be willing to take small profits quicker.

Now I can’t say for sure what happens on a day to day basis because I’m certain there will be days where the market “acts well” and a lot of stocks make moves up. But the “overall environment” itself has changed and I think hit and run trading is the way to go.

When the market turns ugly like this, it’s usually not just as simple as going full-blown short. We could gap down Monday and then have a huge snap-back rally. I’m sure there will be days where the market gaps up significantly too.

The key is to realize that going into this week that “all is not well”, which I’m sure you knew before you read this post. So personally I want to be defensive as possible and understand that there will be better environments in the future.

Last summer was a wild one. We had that “waterfall sell-off” and then from a lower lever we had a lot of wide-range choppy trading and many stocks made big up moves for a few days – tradeable bounces. I actually remember a few days where there were dozens of stocks up double-digits on these bounce days, even in a bad overall market. So we are by no means throwing in the towel and walking away until the market gets better. I think we just have to be more nimble and less active until the time is right.

In the past, with the market and most stocks looking so horrible going into the week, I would refrain from posting new charts here. The ones last week got swept down with the market as did most others.

But I figured I would go ahead and put a few that are on my watchlist that have some possibilities.

Here they are on the daily charts.

So in conclusion, we are going into the week in extreme caution mode.

I am sure we will find some stocks that make nice moves regardless of what the market does on a day to day basis.

The Grid is the tool I use to put these stocks on my radar and then it’s all about the chart…

Be careful this week and don’t assume anything is safe to hold. Be sure to have stops on all open positions and while I don’t think it’s likely, don’t discount the possibility of the “waterfall sell-off” to around 1300.

Be defensive….

As always, join us Monday morning at the market open and we will she how this plays out. This past Friday we said on the show “no reason to buy anything” and we didn’t get any intra-day setups at all. sometimes not losing money by staying on the sidelines is the best strategy.

It was actually a bit of a surprise to me, but then again it seems like a “bizzaro” market lately.

Instead of buying breakouts and selling on breakdowns, it seems the recent behavior tends to favor “buying the lower-end of the range and selling the upper-end of the range.

So this week, it wouldn’t surprise me to see the market test the upper-end and then reverse and pullback.

You can see what I mean on this daily chart of the S&P 500.

We have one more trading day in April, then the dreaded “sell in May and go away” will come into play. Last year if you recall, the first trading day in May marked THE high. The market actually gapped up that day, reversed and it was all downhill from there.

I’m almost certain it won’t play out that way again this year because that would be way too easy.

The last thing most people expect right now is for the market to slice right up through the recent highs and rocket up to 1440-1450. But I’m not totally ruling that out. I have to say that the chart of the SPX actually looks good from a technical standpoint and it is possible that the last few weeks of “choppiness” was just digestion and the market is getting ready for the next leg up. The “W” pattern I see that formed over the past three weeks, usually carries back to the previous high. As far as ‘slicing through”, we’ll have to just see about that.

There could actually be enough good earnings releases coming out to send it through the resistance. We’ll just have to see what happens if/when we get back to the high.

Behind the scenes, it’s no mystery that almost all the recent economic data has been “less than expected” and I’ve read some articles suggesting the leading economic indicators are pointing toward a possible recession looming ahead (official one that is).

Some are saying the past quarter might be “peak earnings” for many companies due to the current recession in Europe.

But in the near-term, that market might not care about any of that and continue to confound the naysayers and skeptics and hit new highs. We are so close here…

I’m impressed by the resilience last week and am never one to fight the tape. Last week I talked about the possibility we were setting up for some shorts, but the pullback never gained momentum and the market is back in the upward-sloping channel.

For now, I’m focused on individual stocks and there are a lot of good looking charts out there. I kind of feel like I missed some opportunities last week as I review the charts of the “stock to watch “ list in the Research Lab. Everything was “dicey” going into the week with AAPL earnings and the FOMC minutes and the Bernanke conference, so the real window of opportunity was Thursday-Friday which you know I hate. I don’t like going into a weekend with a lot of exposure because you never know where the market opens Monday. Last week if you were holding a lot of stocks into the weekend, last Monday’s big gap-down was no fun…

We are right in the thick of earnings season and a lot of stocks with constructive charts are about to release earnings this week. I have a tough time buying a stock right ahead of the earnings release because it’s a “crapshoot” to say the least. So be careful…

Here are some stocks that look interesting to me. Be sure to check the earnings dates on these. (notes on the charts).

I stumbled across a graphic from one of our old training sessions that you might find interesting.

It’s pretty self-explanatory and the pattern is consistent with many of the charts I mark up here on the blog and the ones we do on the shows.

It’s really the pattern to identify a “change in trend” and is viable across all timeframes.

Look at the chart of WPRT above it and you might see how there is a “potential” change in trend coming.

However it doesn’t always work out perfectly and there is always the chance of getting stopped-out. But the idea is to be able identify the pattern to help pinpoint the area where the “turn” occurs before the stock moves too far away from the inflection point.

I think this example was originally created as an example using a 60-minute chart, but I think it’s valid on all timeframes.

As you know, we are working behind the scenes every day on the new version of the Research Lab. I’m shooting for a target date of June 1st to roll over to the new one.

You won’t have to do anything to get the new version.

One day, you will open the Research Lab and be presented with the new interface.

Click here to take a look if you haven’t seen it.

Notice at the top of the page there is a message about the Trade Plans. We have this automated to say either “There are no waiting trade plans today” or “There are waiting trade plans in XYZ ABC” etc.

We have also included “email alerts” so you can be notified when there is a new Waiting Trade Plan. There is a Yes/No option on the “My account” page to receive the email alerts.

In addition to that we have added a “stocks on the radar” feed that will give additional idea for stocks to monitor closely from day to day.

We are also tossing around some other ideas for longer-term trade ideas and a few other notable additions.

Once the new platform is finished, we will have a lot of flexibility to tweak and change things as far as what type of trade setups to include and how to present them.

The goal is to cover all timeframes – daytrades, swingtrades, investments. And we want to make clear which sections are for which.

This blog will be changing too, moving inside the new framework with a wider viewing area so I can post larger charts and graphics.

I’m pretty excited about this new version as you can tell and I just wanted to let you know that’s it’s imminent.

If you have any suggestions as to what you would like to see added, use the Contact form in the Research Lab to send me a note.

We will see you Monday morning at the market open on the Live broadcast in the Research Lab.

Cheers!

The DOW is only about 2% off the recent highs. The NASDAQ is only down about 4% and the S&P 3%.

But a good majority of stocks are way off the highs and many have been hammered.

Behind the scenes, the past couple weeks have not been a good trading environment at all.

This week everything will hinge on AAPL’s earnings I suspect and certainly the indexes will reflect the “reaction”. They report Tuesday after the close.

Last week I had a chart of the S&P with a note on it.

This week there was no need to change what it says:

If by some miracle there is a positive reaction to Apple’s earnings and IF all of a sudden the QE3 chatter picks back up, the market could move back into the upper end of the range. But more likely, in my opinion is a break down.

Last week the market really did nothing but chop around and frustrate both Bulls and Bears, moving pretty much sideways.

This week I expect the range to expand even further…should be a wild ride.

Since I only had a handful of setups here last week, I thought it would be interesting to review the charts. I’ll put a link to the original setup above each one so you can see what they looked like last week.

AKAM last week

INVN last week

MDAS last week

MNRO last week

THC last week

VCLK last week

VECO last week

Based on the drubbing a lot of stocks took last week I would say that those didn’t turn out too bad. A couple of them still look pretty good. Watch THC closely for a break above 5.50.

Since I expect this week will be volatile and hinge on the things I mentioned above, I’m not feeling too aggressive just yet.

So this week I have just a few more stocks to add to the watchlist…

PPO is an interesting stock. It looks to me like it may be bottoming out here and if it can move above last week’s highs, I think it has 10 points of upside. Earnings are due out May 2nd, so I will watch it closely between now and then.

Last week I said “I would not establish new “investment positions” until conditions become more favorable. In that capacity, it is simply better to be patient and let the correction play itself out.”

I feel the exact same way now.

I’m really learning towards caution here, more so than usual. The market has to prove it wants go up, otherwise I could see some real weakness – the “scary” kind.

But the light at the end of the tunnel is this:

IF we get a big selloff and the S&P moves down into the 1330-1340 area over the next week or two, the “sentiment” will be so negative that I will be looking for a massive tradeable rally.

Seems to me we are “on the fence” right now and will have a better read on things this time next week.

Join us on the Live Broadcast at the market open this M-W-F as we watch the action unfold.

PS. I’m actually starting to take closer looks at the inverse ETF’s…TZA EDZ SDS etc. If things start to get get ugly, I might consider some short-term trades in these.

“It’s usually not a good idea to sail in rough seas”.

Last week I had a chart of the S&P 500 and noted “looks like the market might pull back and test the 1360-1380 area”.

I drew a green rectangle on it where I thought the likely trading range might fall.

Here’s a look at what transpired, zoomed-in on the 15 minute chart.

If I had just drawn the green zone “in the 1360-1380 range” like I said, I would have pretty much nailed it…

I did get the direction right.

Here’s what to watch for this week on the daily chart:

It would not surprise me at all to see additional weakness, and a test of the major trendline.

If we break below it, we might see 1330-1340, where I would expect a bounce.

If the market “waffles” around the trendline, then manages to show strength, we could get a sharp rally.

Everyone is turning Bearish right now…

The sell-off at the end of the day Friday means you want to be cautious going into the week.

Best case scenario is a couple days of “weakness or washout”, then a snap-back rally.

I’m keeping a close eye on the IWM (Russell 2000). It tends to lead the market and be most representative of what’s really going on with most stocks.

Be patient this week and watch for a re-test of the lower end of the range, then a bounce.

In the big scheme of things, until the IWM moves above both the 17 and 43 and the 17 crosses up through the 43, be on the defense. That might mean “on the sidelines” or it might mean quick in and out trades.

I would not establish new “investment positions” until conditions become more favorable. In that capacity, it is simply better to be patient and let the correction play itself out.

Last week I wrote here:

“I’m thinking we are in for a couple weeks of choppy trading with a downward bias. The sentiment is about to shift to being primarily negative, and I actually think that will set us up for a buying opportunity.”

So we are only one week into that…

I also said:

“But you have to be patient. This week and perhaps next, I think it’s going to be a little trickier trading because we are likely to see “range expansion”.

I’m sticking by what  I said a week ago, as we head into this week…

With that said, there are still some interesting chart patterns out there, just not really “dozens” .

Here are a few that look interesting. Note the timeframes vary , but any that are not daily are noted on the chart.

Keep in mind that the current environment is risky and you simply have to use stops in case it gets out of hand and we see a “waterfall selloff” that takes everything down. It’s possible, but not likely…

Here’s something interesting. Breakouts have not been working the past couple weeks. No surprise. I’ve reviewed a ton of what we call “fake-out break-outs” on the charts and it leads me to believe this:

Buying the “spike downs” or looking to enter “near the lows” of a range might be a better strategy for the time being.

I think we will see some stocks move substantially lower, then reverse.  The nice thing about buying the “low end of the range” is that the stops can be very tight…

I am in full-test mode on the Trade Plans in the new Research Lab software. I’m setting up like 5-6 per day and making sure everything is perfect. So far it is…

Here’s a screenshot of one of the test subjects (click image for full size).

Since we only have one Open Trade Plan going into the week, we are carrying minimal risk. That’s a good thing.

As the week unfolds, I will likely introduce a few more. Be sure to check the Waiting Plans page each morning before the market opens.

And as always, be sure to join us Monday morning at the market open. We will take the stock picks from the Grid and look for low-risk opportunities.

Sailing in rough seas can be exciting, but if you don’t have the stomach for it, just sit on the shore until things settle down…

Based on the non-farm payroll number that came out on Friday when the market was closed, the futures took a pretty good hit.

It would appear that the market is due to gap down at the open Monday.

I welcome a little correction…

Here’s a look at the where the Futures closed Friday. Notice the big “red candle day” that only happened in the futures….so far.

Below is a look at the S&P 500 at Thursday’s close.

So it looks like this week we trade into that green box I have drawn on the chart.

Not really a big deal. The market needs a little pullback/correction here.

The key thing to watch is the upward-sloping trendline. If we even get down that low, I think that’s the major support line.

It would be quite a shake-out if we hit that this week. Right now it’s at about 1360.

If the market breaks below that in the next couple weeks, the next key support level is around 1340.

Somewhere in that range the dip buyers will step in, if not before…

We have a couple weeks to go before “earnings season” really kicks in and that’s the perfect time for a little “backing and filling”.

When the earnings start to come out fast and furious that will really set the tone for the direction of the next move.

I’m thinking we are in for a couple weeks of choppy trading with a downward bias. The sentiment is about to shift to being primarily negative, and I actually think that will set us up for a buying opportunity.

But you have to be patient. This week and perhaps next, I think it’s going to be a little trickier trading because we are likely to see “range expansion”.

I’m not expecting a bunch of breakouts and across the board strength. I think it’s a good time to get the shopping list together and be patient.

Here are some stocks that I will be watching.

Note that these charts are all different timeframes…check the notes on the charts.

I think we should be defensive, at least going into this week. I’m not looking to get aggressive on the long side at all right now.

The good news is that the “action” and volatility is really starting to pick up.

In my opinion that will give us a much better trading environment, but you have to be nimble and very careful for the time being.

I’m not expecting a “waterfall sell-off” like last May, but I am aware that’s always a possibility.

As you know, going into any weekend, especially a Holiday weekend I don’t like to have a bunch of open trades. Right now we only have one open Trade Plan and it may or may not get stopped out.

But I have a bunch of stocks that look great going forward so I’m expecting a few new Trade Plans this week.

I’ll probably wait to see how Monday plays out first…

Speaking of Trade Plans, we are in the testing phase this week in the new version of the Research Lab.

How do you like the new look?

The cool thing is that the new RL platform gives me a lot of extra flexibility behind the scenes.

You will see some big changes once we get it live. And guess what? We are way ahead of schedule…

Here’s a look at the new interface in case you missed it:

Research Lab 2012 New Home Page Interface

I have some big ideas once we get the “platform” finished.

Short setups, longer-term trades, dividend stock trades, etc.

I’m really excited about the upgrade and I know you can’t wait for the rollout.

I can’t give an exact date yet, but it will be worth the wait.

But what matters is that we make money trading stocks. I’m confident that’s what we will be doing, just like in the past. As a matter of fact both 2010 and 2011 kind of got off to a rough start but we ended up with excellent results in the end, 29% and 40% respectively.

While past performance is no guarantee of future results, history will indeed repeat…

Join us Monday morning at the market open/gap-down as we watch the action unfold.

We will take the stock picks from the Grid, mark up the charts, and find opportunities to trade the patterns as always…

We do plenty of ongoing market analysis throughout the week on the live shows, so I thought it would be nice to really bring a good list of setups.

If you like any of these and want to analyze them further, let us know in the Research Lab.

Notes are on the charts…

By the way, I used the MACD as the primary indicator on these daily charts, but I also use several others.

The charts would look too cluttered if I had more on there, but I like to watch the RSI and Stochastics along with some others.

I have been experimenting with the Elder’s Force Index and I usually observe the 30 day linear regression of the stock price.

I have several “tabs” in my Freestockcharts.com software with the daily timeframe and these additional indicators as well as 20-50 and 200 day simple moving averages.

As you know I also like to zoom in to the 60-minute and 15-minute timeframe when one of these setups looks like it’s getting ready to break out and move up.

The usual disclaimer applies. some will fill and some won’t. Some of the patterns might fail and some might be fake-outs.

A lot will depend on the overall market…

Be sure to always use stop-loss orders to prevent large losses and never let yourself get “buried” in a stock.

A good rule of thumb is to never risk more than 2% of your account on any one trade. Place a stop where it makes sense on the chart and make sure if that stop gets hit it’s under 2% of your account.

I like to also take profits in increments and move up the stops. Each trade is a little different and there are several good strategies for managing open trades.

I like to buy into strength and a stock has to prove it wants to go up. That’s why we wait for a move to the upside and a trendline/resistance break before we consider a fill.

Be sure to join us Monday morning at the market open on the live show in the Research Lab.

See you there!

"A good signal jumps at you from the chart and grabs you by the face – you can’t miss it! It pays to wait for such signals instead of forcing trades when the market offers you none”.

- Dr. Alexander Elder

I wanted to take a close look at the S&P500 last week  on the 15-minute chart. I used the SPY instead because it shows the opening gaps.

Here are my observations based on the chart above:

• The market high for last week occurred mid-day Monday and it was all downhill from there.
• There are 2 significant opening gaps down.
• The price was below the downward-sloping trendline practically the entire 5 days you see above.
• The majority of volume occurs at the beginning and end of the day.
• The 17 ema crossed below the 43 ema Tuesday morning because of the gap.
• The 17 crossed back above the 43 Friday near the end of the day and the price is above them going into this week.

My observations based on what I see:

Last week was not a great week for swing trades if you assume a typical stock with reasonable correlation to the SPY shown above. I imagine positions initiated early last week are either underwater now or got stopped-out.

It was not a good week to swing trade. A lot of stocks have “toppy” charts at this point.

However I do see a “bull flag” forming on the chart.

This is the key: In order for the market to  turn positive and start going back up, (like it always seems to do?), it MUST break or move above the downward-sloping trendline.

Monday we are headed right into the “inflection point” on the 15-minute chart because the market is either going to break above the trendline or the price is going to drop back below the 17/43.

I am somewhat cautious UNTIL I see the  trrendline break and the 17 start to spread away from the 43 a bit.

When the 17 and 43 are “pinched”, as shown in the yellow box above, it iindicates a “transition area” and the subsequent direction is not clear. The best indication after the “pinch” is to pay close attention to the angle of the moving averages as they spread out.

Quickly I want to show you the 60-minute chart. The 60-minute as you know is my “go to” chart and to me, the 17/43 ema’s  are most significant on that timeframe.

Right now it looks like everything is in “temporary” equilibrium on the chart above.

The 17 and 43 are pinched together and the price action is literally right at the same levels of the moving average convergence. That’s actually fairly rare…

So the strategy going into next week is to let the price action to show us if it can break up out of the flag, or if there’s one more cycle down in the falling channel.

Honestly one more week of a “somewhat orderly pullback” would actually be a good thing. It might be a little discouraging in the short-term for impetuous traders, but will set things up for better  swing trades down the road.

As much as I would like to see a big break to the upside of that channel this week, the “duration” of this pullback is questionable.

If the market PROVES to me it wants to go up this week, I won’t ask questions. However if I start to see the signs that there’s “another cycle down to retest the lows or even the bottom trendline of that channel, then I don’t want to trade aggressively to the long side.

If I squint my eyes, I can almost see the dreaded “circus-tent top” pattern on the 60-minute – at least I think that’s a pattern…

A few more thoughts:

We are no longer and probably never will be again, in a “typical” market environment of the past. If a stock – BATS – can IPO at 15 and then drop to essentially 0 in a few milliseconds, then withdraw the IPO, anything can happen.

If 100 share “fat finger” trade in AAPL can cause the stock to be halted temporarily, then “this ain’t your Grandpas market” anymore.

I started in this business when stocks traded in fractions and I attribute my longevity to one thing. Willingness to adapt to the current environment – continually.

Last thing, then we get to some charts…

I strive to never be “complacent”. I approach every day in the market aware that at any point in time, a selloff of significant magnitude and duration could begin for any number of reasons.

In other words they can always “pull the rug” (or magic carpet) out from under the market and I don’t want to be “heavily exposed” if that occurs.

So be careful this week until we see how the patterns we’re watching manifest themselves. The indicators should provide the clues…

If the market decides “the dip” is over , I have plenty of ideas on the radar.

Here are some setups I will be watching this week:

I could have easily put another dozen on the radar, but I didn’t want to overwhelm.

As always be careful with these setups. Some will get filled and some won’t. Some may poke above the resistance then reverse. Some are very volatile and some are days away from breakouts.  Always use stops and always be willing to sell now and ask questions later, if a trade doesn’t move in your favor. There’s never a bad time to take profits and there’s never a bad time to take “small losses”.

Keep your eye out for new Trade Plans this week. The current “Waiting Trade Plan” still looks good. We’ll see if we can get some filled this week…

Be sure to join us Monday morning at the market open in the Research Lab on the Live broadcast.

That’s where the real magic happens…

Cheers!

As you know, we have been watching the Russell 2000 here on the blog for a few weeks to get a gauge of what’s going on under the surface of the market.

Of course we all know the DOW and S&P and NASDAQ made new highs last week, but we are keeping an eye on the IWM for confirmation.

We didn’t get that yet. As a matter of fact the IWM just reached up to touch the top trendline, but never moved into the green area we have been watching.

It’s hard to say what will happen this week, but with the indexes up every day last week, it would not surprise me to see a little profit taking.

Friday, which was Quad Opex day was very strange if you ask me. I saw a lot of unusual action and the stocks that made the biggest gains were in the most hated sectors –  solars, coal, shippers, etc.

Are we seeing the beginning of sector rotation into these areas or is it the last gasp, where money goes into the most beat-down “dogs”?

I guess we’ll have to see how it plays out this week. There are a lot of strange undercurrents at this point in time and it should get interesting from here.

Here’s a 60-minute chart of the IWM that points out the levels we are watching. An eventual move into and through the green area would confirm “all systems go”, but we might get a little “backing and filling” first. Perhaps even a pullback to the mid-point of the larger sideways channel, gasp!

It’s pretty much struggling with the highs there right?

The market can and will go down on any given day. A drift back to the mid point of the pattern wouldn’t be a big deal at all.

We shall see…

I thought it would be interesting to revisit and review all the trade setups I posted on last weeks blog.

I’m not sure how closely you follow the setups and if you review them at the end of the week so I thought that might be interesting.

Here are the trade setups I posted here last week and how they played out…

I have added notes to all the charts below and I have a link to the original setup above each one (images open in a new tab).

BKI original setup <—click here to see what it looked like last week

CALX original chart <—click here to see what it looked like last week

CTB original chart <—click here to see what it looked like last week

DANG original chart <—click here to see what it looked like last week

FRX original chart <—click here to see what it looked like last week

HCSG original chart <—click here to see what it looked like last week

HSP original chart <—click here to see what it looked like last week

HST original chart <—click here to see what it looked like last week

INAP original chart <—click here to see what it looked like last week

INCY original chart <—click here to see what it looked like last week

INFA original chart <—click here to see what it looked like last week

LF original chart <—click here to see what it looked like last week

MSPD original chart <—click here to see what it looked like last week

RLD original chart <—click here to see what it looked like last week

SUNH original chart <—click here to see what it looked like last week

TEVA original chart <—click here to see what it looked like last week

VECO original chart <—click here to see what it looked like last week

XXIA original chart <—click here to see what it looked like last week

So there you have it. An interesting review of all the trade setups from last weeks Research Lab blog and how they ended the week.

Some of those stocks might still be good for the watchlist gong forward and others, perhaps not.

Ok…so now on to some new setups that have my interest going into this week.

I could have gone on and on, but wanted to keep the number at a reasonable level in case I decide to “review” them next week. That was an extraordinary amount of work…

As always, some of these setups will fill and some won’t. Some might break out then throw-back and some might reverse.

Be sure to add the ones you like to a watchlist in your charting software and follow them closely.

Use stops that make sense, based on the chart and your risk-tolerance.

IF the market decides to pull back or acts weak, these may not fill or work as planned so always be cautious, especially after the run-up we just had.

Lastly, I wanted to let you know that we are making significant progress on the brand-new “Research Lab 2012”.

I’m already using it on my iPad on a daily basis and soon we will have all the modules integrated.

Click Here for a look at the current Home page interface.

As many of you have asked for recently – yes, there will be email alerts in the new version when a Trade Plan is staged on the waiting page.

Also, this blog will be be moved into the new interface and will have a new look – very fresh and clean.

Every section of the Research Lab is being reconstructed using “state-of-the-art” programming and technology and I am really excited about it.

Some of you have been with us since the original launch back in 2008 and I think that you will really like the big upgrade.

Like I said last week, the goal is “platform and device independent”, with a simpler and cleaner layout. Stay tuned…

Be sure to join us at the market open for the Live Broadcast this Monday-Wednesday-Friday in the Research Lab.

It should be quite exciting…

Last weekend I started the post with a warning…

Subsequently we witnessed the significant “red candle” that transpired Tuesday.

If my warning last weekend encouraged you to be a bit cautious out of the starting gate last week, then I did my job.

If you sat on your hands Monday and Tuesday, congratulations.

If you read last weeks post, you will know why I didn’t initiate any new swing trades this week.

We have discussed the “buy the dip” guys and I have to say they were very aggressive…

Ahh, but last week was last week – and Greece didn’t default until late Friday. Literally just a few hours ago as I write this…

It’s about to get even more interesting…

I took the liberty of jotting some notes on a 60-minute chart of the Russell 2000.

Please take a look and see what you think.

As you know, throughout the week we focus on the S&P 500 as “the market”, but on the weekends I like to use the Russell. It frequently leads the market and it’s behavior seems most representative of the broader range of stocks.

Technically speaking, until and unless this market is able to break those highs, I want to be in defensive mode.

I can actually see about 4-5 different possibilities of how it plays out on the chart above. We’ll discuss those next week.

I do know this.

There is a battle that will rage between the green and red arrows above and it will be fun to watch it play out.

I’m still scratching my head over the big rally off Tuesday’s low. Not sure what to make of it.

Were the dips buyers geniuses?

Was it a mistake to get stopped out of positions last week?

Is “reversion to the mean” still valid  and on what timeframe?

Is there an invisible hand behind the scenes with the diabolical intention of driving this market higher?

Or do they plan to pull the “magic carpet” out from under it when everyone’s least expecting?

Didn’t the indexes hold above or bounce off the key moving averages?

I could go on and on with the questions, but we will save that for next week’s show, where we can ponder the situation in real-time.

Before I get to the “stocks to watch” I wanted to show you something very cool…

As you members know, behind the scenes we are building the new version of the Research Lab.

It is going to be a significant leap forward as far as the technology and capabilities, but I won’t go into details here.

Here’s a screenshot of the current iteration of the Home page: (click image to enlarge)

I’m liking the streamlined interface, but the real magic will be behind the scenes.

Our ultimate goal is to make the Research Lab experience both platform and device independent.

With some cool new features of course, like email alerts and such.

Ok, Enough reading for now. Let’s look at some pictures.

While the overall market has me on pins and needles, I have to say that I haven’t seen so many good “potential” trade setups in a very long time.

Actually, perhaps time is speeding up and compressing and the setups I thought would take a couple weeks to manifest just took a few days.

Here’s a few on my radar and I haven’t really even dug into the scans yet…hmm.

There are Daily charts:

So there you have it, a handfull of stocks with potential if the market “acts well”.

As always, the standard disclaimer and warnings go with the above charts. Anything can happen and I never assume just because a stock "breaks out” it will carry.

Some will fill and reverse, some will fill and go up. Some won’t fill and some will trade “all over the map”.

I’m actually finding myself adjusting the trendlines, patterns, support and resistance on most of stocks in my watchlists after last week’s “pullback”.

I suppose if “they” continue to push this market higher, perhaps the “animal spirits” are just getting started.

On the other hand, if dark forces prevail, and the market loses the recent lows, then all bets are off.

There are dozens of cross-currents at the moment and a case could be made either way.

So join us next week in the live room of the Research Lab and we will find you some good stock trades as always.

I actually have a new trick up my sleeve…

I can’t wait for the market to open!

More about that next time.