Good evening traders/investors. We had a very nice end to last week with the Russell rebalancing bringing significant volume and positive momentum to the market, only to have a very boring and unemotional Monday. The week saw a downtrend in the general markets only to find some much needed support, lately. The big question is can the bulls gain some traction, now that the Russell rebalancing volume is no longer helping, or will the bears gain control and move us down another leg. I have mixed emotions on this and will attempt to explain in more depth, before I jump into the requested chart analysis for Monday.
As stated previously, these sideway action days are tough to make money on. When the market does not have a clear direction, you simply cannot capitalize on it with ease. I am inclined to be slightly bullish for the week, as we should receive some end of the quarter strength to sell into. However, with such a dreary day like today, I have a tight leash on my trades. We saw some consolidation with the Russell names, which saw heavy volume last week, and that is typically nothing to be concerned about. I am looking for the end of the quarter strength to help continue their run-up, but the picture isn’t entirely positive. Without volume, these stocks are unlikely to break resistance levels therefore leaving downside risk. The hurricane news is unlikely to help the general markets either as this BP disaster could take a new twist. Oil is unlikely to give us too much strength, if any, contrary to hurricanes helping oil prices, as the recent run-up has made $80 crude oil a tough resistance to break. On a side note, some energy experts are recommending buying refiners now. So, I am bearish oil in the short-term and without oil leading us up, we will rely on technology to be our short-term savior. In the meantime, I am watching some ETF’s, which short various sectors, as we may be in a position to be short the market, at any time. It is better to be prepared for the worst yet hope for the best.
With most of the recent action being more random than logical, it is hard to find the next big move to capitalize on. Tuesday should be a make or break day for the end of quarter strength, being that Thursday is already July. If the low volume action in the market continues though, we could see very little upside strength giving the bears more confidence. Now that I gave you both sides to the argument, here are the charts below.
FSI International (FSII)
A/D line: Strong uptrend
ADX line: Signaled buy in early June and the stock went bullish, still in bullish phase but trend has since weakened. Looking for a bounce from here.
MACD: Signaled buy in early June and the stock went bullish, confirmed buy signal with ADX. Has weakened since but is still positive.
CMF (21): positive since late May, bullish
OBV: Confirmed all moves in the PPS, normal
RSI: Neutral territory closer to overbought territory. This could mean the upside potential might be somewhat limited.
Resistance: Recent failed attempts to break $4.70
Analysis: FSII was a Russell rebalancing stock on my watch list. The chart seems like it could be poised for another upside run. Today was a solid day, for the chart, as the Russell rebalancing buying is over, yet the stock still showed strength. The A/D line is very bullish and leading me to believe the odds are in favor that FSII will bounce from here and keep the ADX/MACD in bullish phases. Look for a retesting of resistance as soon as Tuesday else keep your stop losses tight.
CDC Corp (CHINA)
A/D Line: Strong uptrend
ADX: Signaled a buy last week and the PPS moved up
CMF (21): Positive and almost .5 which is very bullish
MACD: Signaled buy in mid June and ADX confirmed it shortly after
OBV: Confirmed all PPS moves, normal
RSI: Neutral territory closer to overbought territory
Support: Support started to build today around the 50- day moving average
Resistance: $2.40 was a wall on the Level 2 quotes today, was never broken
Analysis: CHINA was another Russell rebalancing play on my watch list with a nice setup. The A/D line is strong and today confirmed the strength, as it found support on the 50-day moving average. CHINA is trending beautifully along the top Bollinger Band and reset nicely beneath the top BB today, without falling at all, which is bullish. The CMF (21) is very bullish and hopefully this will continue with the strong A/D line pushing the PPS past resistance. CHINA has had a nice run already, so it was expected to see consolidation before more movement north. However, that may take too long, so I’d look to exit the trade soon if we don’t get the volume to push us past resistance tomorrow. Never turn a trade into a longer investment, even if it’s only a little longer than the original plan. Today’s close was nice so I will look for further upside but with a short leash.
Sirius XM (SIRI)
A/D Line: Strong uptrend
ADX: Bearish trend which is weakening
CMF (21): Positive and relatively strong. .5 or higher would be very bullish
MACD: Leveling off which could be a sign of a downtrend or just a consolidation of all the recent volume before a move up
OBV: Confirmed all PPS moves, normal
RSI: Neutral territory closer to oversold territory
Support: 100-day MA
Analysis: SIRI had a relatively nice Friday but was unable to gain any traction today. To be fair, the bears did not gain an advantage either. The stock actually traded in a range of only 3 pennies. The good is that we didn’t test support levels on the 100-day moving average so we clearly have strong support. The bad is we didn’t have enough volume to push us past resistance levels. We are in a tug-of-war which is shown by today’s “doji” formation. However, we have strong support at the 100-day MA so I’m more inclined to let SIRI play out as long as it doesn’t break that support level.
Verde Media (HMIT)
A/D Line: Strong uptrend continues
ADX: In a bull phase with the trend strengthening
CMF (21): Positive and nearing a very bullish .5
MACD: Continuing its bullish move north
OBV: Confirmed all PPS moves, normal
RSI: Near overbought territory.
Analysis: HMIT is a great looking chart right now and one of my favorite speculative plays over the past week, when I initiated a position around 13. It has reached overbought territory, per the BBands, and it would be healthy for the chart to trend sideways around 21, accumulating more, and making a strong push north. All other indicators are very bullish and this chart, with enough volume, looks ready to explode further. With the volatility it see’s daily, you might be able to pick up some cheap shares. Do this by putting in an order early enough in the day rather than just buying at resistance levels.
NW Tech Capital (NWTT)
A/D Line: flat but strong positive number, needs to uptrend further
ADX: In a very strong bull phase
CMF (21): Positive with no indication of going negative
MACD: Signaled buy today but due to the low volume and strong ADX bull trend, it could easily be a fake signal
OBV: Confirmed all PPS moves, normal
RSI: Neutral territory
Analysis: NWTT is a new speculative play I initiated, per the research from a good trading buddy in our live chat. The A/D line is strong and the ADX line makes me very bullish. The low volume today was concerning. If it continues again tomorrow, low volume could make this chart downtrend to painful levels, but 8 seems to be a relatively strong support level with plenty of upside potential. Look for the MACD to signal buy again, as soon as tomorrow. If not, the ADX might start downtrending which might be enough reason to get out, just in case. Play the odds rather than hope to always be right when you expect a bullish move. NWTT is definitely a speculative play so this is not for the faint of heart.
Hopefully, the charts above helped you determine how to play the odds in your favor over the coming days. As always, do your own homework to see if you agree and join our live stock market chat-room, if you have questions. See you in the morning. Good luck out there.
Mike
At the time of publication, Kudrna was Long SIRI, CHINA, HMIT, and NWTT but positions may change at any time.
