Today was a second consolidation day in two. If you look at the 60-min. charts on the market watch 4 (SPY, DIA, QQQ, and IWM), you‘ll see a clear pattern of sideways action since the gap down Monday morning.
All four markets also closed in the upper part of their range and all but the Q’s closed over the prior day’s high. This creates a situation where they may all open above their pivots which are positively stacked and above Monday’s high. Both of these levels will be areas to look for OR Reversals.
The consolidation day also means the markets have held the support area of the 20-day MA’s. The IWM’s managed to get back above their 10-day MA which is still positively sloped. The QQQ is the weakest relative to its 10 and 20-day MA but it is also sitting right on top of the 200 and much stronger on a longer term basis.
After two days of consolidation a trend day is very possible. News out of Europe remains the wild card. With a modest amount of optimism the pivot set up at support could lead to a nice up day. Any bad news, however, and the consolidation could create a big trend day down. Absent any news I would play reversals or quick 5-min breakouts in the direction of the stock’s major trend so your are positioned to take advantage of either chop or a trend day.
Stocks To Watch
A few days ago I posted about the importance of the market’s location relative to the 200-day moving average. The market has since pulled back and consolidated, but not in a decidedly bearish way. This leaves the markets full of great patterns for both long and short, day trades and swing trades.
A powerful and simple way find stocks that are in a good location to move up or move down is to start by looking for stocks that are relatively strong or weak. In the advanced filters section of HotScans you can filter stocks based on their location relative to many different “Historical Ranges”.
Currently, stocks near 52-week highs are relatively strong, and stocks near 30-day lows are relatively weak. You can easily screen stocks for this criteria and then quickly look for good trading patterns in their charts. Below you’ll see an image of I did this for the stocks near 52-week highs ranked by their relative volume. The list has some interesting stocks for swing trading or day trading that I was not focused on. For example, CHKP, FE, SGEN, and VCLK to name a few.
(Clicking on the the image will enlarge it)