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Every trading day, the ShadowTrader Focus List provides you with detailed trading ideas that have defined entries, defined stops and defined targets. Each issue contains 2-5 plays daily with full chart annotation explaining the rationale behind the setup. Stocks that are in focus may contain new breakouts to 52 week highs or lows, trendline pivots, pullbacks to moving averages, strong consolidations that are "building up steam" for a future move, or other technical events that foreshadow impending price action.
Additionally, each issue of the ShadowTrader Focus List always includes "The Big Picture" which gives a heads up on key technical levels in the broad market and a short term bias outlook. ShadowTrader feels strongly that the highest probability of a trade moving in the desired direction happens when the entry is correlated with pivots in the broader market which provide added momentum.
Good Morning, Traders. Whoa! Apparently there is nothing more influential to the markets than when Uncle Ben decides to hint that the raising rates cycle may be coming to an end. Thats what happened yesterday as Benjamin Bernanke's remarks were construed as "dovish" vs "hawkish" and the Dow ripped ahead by its biggest one day gain this year, galloping forwards by 212.19. The S&P and Nasdaq reacted in kind with advances of 22.95 and 37.49 respectively. Although we've seen these "Fed Rallies" before and their usual M.O. is to slowly deflate over the next few trading days after the announcement, some of the market internals in yesterday's session were amongst the most bullish we have seen in some time. Breadth on the NYSE closed at twelve to one positive although on the Nasdaq it was a far less impressive with a ratio of just over three to one positive. Advancers led decliners on the big board by over 2400 (!) and just over 1600 on the Nasdaq. One area of concern which would define the advance as more short covering than new buying was the fact that the ShadowTrader Core Sector List was led by homebuilders and mining stocks rather than semis and financials. On a day when both housing starts and building permits came in lower than prior period and below consensus, was the strength in homebuilders and their broken down charts new buyers or shorts covering? The Big Picture thinks the latter.
Our job now is simply wait and see. As we saw the last time Bernanke was in the spotlight, the market moved up a huge piece and then promptly went much lower the following week. The annotated chart above simply shows where the rally took us and what lies ahead. No predictions, no prognostications, just the technicals, maam. If we break that diagonal blue line to the upside, AND are able to hold it for a few days without passing back down below it, then our near-term bias might change and we would start to feel more comfortable about long breakouts on charts that have built some nice consolidations at highs of 52 week ranges. Until then, sit tight..........
For questions or comments regarding the ShadowTrader Focus List, email to focuslist@shadowtrader.net
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UTSI - UT Starcom
Industry - Telecommunications (wireless)
Side - Long
Trigger - 8.10
Stop - 7.60 or low of breakout day
Target - 9.12
Timeframe - multiweek
Notes
- Check weeklies (not shown) to see the reversal of trend happening in this stock and also the pivot from late 2005 highs that is the target
- Stop listed is under low of yesterday's bar but can be tighter under low of breakout bar if breakout is a big bodied candle with good volume
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CMG - Chipotle Mexican Grill, Inc.
Industry - Restaurants
Side - Short
Trigger - 53.00
Stop - 55.50
Target - 48.30-
Timeframe - 1 week to multiweek
Notes
- Target listed is to next pivot on weeklies (not shown) but chart will show that next major support below there is not until $40
- Recent IPO that could be deflating here
- Stock closed very weak near its open on a Dow +200 point day which indicates relative weakness
- Inverted hammer on dailies defines parameters for entry and stop
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