Mosaic for mild, intermediate correction - significant fear in the market over rising interest rates/commodities/many hedge funds failing, the market hasn't gone anywhere in a year and has chopped people up, oscillator is building again, I am seeing some emerging leaders set up. When people are giving up on the market, trend analysis, and active management, I get excited. This is exactly the type of backdrop that gives way to a follow through day and a market and leaders that finally trend.
Mosaic for severe bear market to come - some big leaders like AMZN look tired and extended, market has been narrow this year, not a lot of great setups. IBD called Wed a follow through day this week, and it failed quickly and violently.
Watchlist Update:
I listed these in order of how constructive their action was this week from best to worst (even though they were all "constructive").
VIAV - great RS the last 2 days. 6 weeks into a handle, a cup or a double bottom base. Cups need 6 weeks, double bottoms 7 weeks. We had our 2nd week of volume accumulation (marked with A) in the base with no weeks of distribution.
N - Actually started to build some RS. We had a big week of accumulation (marked with an A) at the bottom of this base! In this year long base, weekly accumulation and distribution is roughly even. Hasn't had a pocket pivot or trendline break yet. I liked the CIO survey calling for increased spending in SaaS in 2016 this week. As I mentioned in a tweet, the overall group has a lack of setups (main technical risk to assess).
LNKD - We are now 6 weeks into a base (a cup) within a base (a cup and handle or double bottom with handle). We had a weekly close within 2% of the week before (not bad for a "beta" stock). A few weeks ago, we had 2 weekly closes within 1% of each other. So far on the weekly, we only have one week of distribution in this 6 week base (the first week), and volume has been very dry in the remainder of the base. We didn't even get above average volume on options day and the 50 day break yesterday.
Using 8% stops, one hasn't been stopped out if they started a position in front of the the 50 day. One hasn't been stopped out if they bought the low of the gap up day, but the stops are close on that entry. Swing traders can look for a gap fill around 219. IBDers who like to cheat from here will look for pocket pivots back up through the 50 day. The non cheater pivot point remains 258. I have included LNKD's current chart plus another similar base within a base - QCOM in late 98 before the run of a lifetime. Both had several years of chop, wedges, subsequent double bottoms and bases within bases/handles. QCOM's bottom of its handle or base within base was just under 50 day.
LITE - great RS this week but "handle building" process might continue. We did have a short 5 day handle, the stock kept riding the 20 day and then "broke out". But my sense is this handle making process might continue. We need a real handle in terms of severity or time (over a week). This might be an unorthodox handle that makes a higher high, then a lower low to key support levels like QIHU several times in 2012/2013. Overall we have a big cup base with no official breakout, lots of weekly accumulation on right side of base (marked with As).
New stock for watch list:
RUN - very early, much work to do. But I loved that this stock was up +100% in a correction. We need to wait for a potential high tight flag formation over next 3-5 weeks. This name is a beneficiary of last week's solar legislation. This is a flakier name. But so was TASR in 2003.
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