Focus List 9/7 - Is The SPY Flagging or Basing?

Geoff Bysshe | September 7, 2011

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Is the SPY flagging or basing?

If it is flagging the implication is the next big move is lower. If it is basing the implication is the next big move us higher. I see a very well defined flag pattern in the context of a bearish phase, the 50-day moving average is below the 200-day MA.

However, as a trader I want to see the flag break down in the direction of the trend for confirmation that the flag will resolve itself to the downside. This is why the trend line from the lows on the daily market watch charts are so important. See the charts below.

While the longer term trend is negative, the trends defined by the 10 and 20-day  time frame have been consolidating and creating support above the flag defining trend line. The trend lines and the big gaps into support have had me trading the exceptions to our rules and buying the lower opening, and reluctant to get too heavily short with OR breakdowns. Tomorrow is a similar dilemma.

The pivots are negative so my bias should be negative. But my initial support target will be the low of today which also represents the break of the trend line so for short trades I'll favor trades where there is enough distance from my entry to that support to justify the trade, or trades were the market has already broken down below the daily trend line or swing low support.

From the bulls perspective the market is holding support, and there are quite a few strong trending stocks with positively stacked pivots. In fact, there are a lot of good looking bullish charts so it is very much a stock pickers market out there for the day trader.

In today's Focus List you'll find that all the shorts have negative pivot stack and daily pattern that has broken down as described above. In the long focus list stocks the majority of them have positive pivot stack and all have daily momentum turning up. Bull or bear, there are stocks on the list that are set up for breakouts and reversals and even mini-swing trades!

FL-SPY-20110907.png

FL-QQQ-20110907.png

Long Focus
* * Positive Stack * *
AAPL
AEA
ALXN
AMZN
BIDU
CDE
CF
CVI
DG
DLTR
GDX
GLD
GMCR
HANS
ORLY
PANL
PCLN
PKG
POT
REGN
TLT
WFM
* * Negative Stack, but Bullish Stock * *
RIMM
WYNN
SINA
COG
BBBY

Short Focus

APA
ATI
ECA
GES
WHR
FSLR
PRU
GS
KSS