We had a nice bounce in the markets on friday, and I'm expecting a little continuation next week. I suspect we'll see the ~138 level in the SPY, with maybe a little consolidation ~ 136.5 along the way. However, we're forming a bear flag as you can see in the daily chart below, which leads me to believe that we might be headed lower in the intermediate term. I've added a horizontal trendline that is sort of my "bull/bear" line in the sand... I'm also watching the edges of the flag for low risk opportunities and to improve my timing in buying/shorting individual names.
Ideally, I would like to see a lower low in the indices, accompanied by some strong divergence signals, like we saw last summer (the chart below is an example with the MACD divergence, although stochastics, RSI and other indicators also showed some divergences). This is typically what a bottom looks like...
It's also interesting to note the negative divergence that formed two weeks ago in the SPY (shown below), and this also happened back inte Sept-2011, so keep an eye on your indicators to get a sense of the overall possible direction.
Here are some ideas for the week:
Parabolic shorts: AFFY, CADX, ETRM, NVAX
Shorts: RPRX (see the chart below), PCYC, PCRX, SMBL, CYTR, DDS, GNK, FONR
Longs: PRMW, LNG, CIE, DMND, PATK, RSE, PSX, ECYT, ASGN, LPI, DXCM
Dead cat bounce: NLST, ADTN, QTM, CALX, SVU, PAL, LXK, AMPE, MAKO, DGIT (sitting on support, see chart below)
It takes me too long to post charts for the whole watchlist, but if you're not sure how to trade these, drop me a line at cathcampbell_25 (at) hotmail dot com and I can explain what I'm seeing and how to trade particular setups.
Good luck this week!
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