ProSelect Report for Monday, 31 May 2015
Chart Study: The last two weeks in the market have been highly volatile, as seen in the daily Nasdaq Composite chart. The strong downside shifted the market back into a correction. The more volatile the market, the more volatile our emotions and opinions. Technical analysis is our real-world anchor in rough seas of uncertainty, so let's look at the technical picture.
1) The 50/200 squeeze moved to the downside. A lower swing low would likely pull the 50 EMA below the 200 SMA, a long-term bearish signal.
2) On Friday, the Nasdaq closed below the 10, 50, and 200 moving averages. For any market recovery, price must first close back above the 10, then 50 moving averages.
3) The recent rebound occurred on "weaker" up volume. That suggests a retest of the recent market lows.
4) RSI(20) is weak at 37. The last RSI high was 39, so a lower high in the indicator would also suggest a retest of the recent lows. (Note: we can't read the RSI high until there is a price pivot high)
5) RSI(4) is nearing overbought territory as price is testing the 10 SMA, a sign of weak price action.
Conclusion: The bears are still dominant until proven otherwise. A pivot high at or below the 10 SMA would likely lead to a retest of the recent market lows. The market can change quickly, so remain flexible should the technical picture change.
Weekly Market Review:
Last week, all three major indexes closed up. Volume ran higher, but part of the volume was due to the large down moves on Monday and Tuesday.
All three indexes closed below their "weekly" 50 EMAs.
The market is likely to have continued high volatility for the next several weeks as it works out the damage done over the last 2 weeks.
Economic Reports on Monday: Chicago PMI
Market Direction Category: (3) Bearish Under Selling Pressure
Market Correction Risk Rating: Market in Correction
Monday Portfolio Preview:
There are currently no stocks in the portfolio after ABMD was a discretionary sell last Friday for a gain of +28% on 25% of shares to close the position.
There are many quality stocks that have been beaten up, and they may setup again. Stocks that are bucking the market action could be considered for long positions, but with extreme caution. Generally, STAND ASIDE means no longs.
Some short trades are appropriate in these market conditions, especially after a bounce to short-term overbought. Should the market be entering a bear phase, then this is a good time to look for shorts.
Due to volatility, stops can more easily be hit, both for longs and shorts. This is because higher timeframe market players are active, and the market makes wider swings.
Market Mode: STAND ASIDE
Current Portfolio Stocks with Unrealized Gains: 0/0
Current Portfolio Stocks with Unrealized Losses: 0/0
Adjust Stop Loss: (0)
Stocks Delisted/Suspended: (0)
Relisted ProSelect Stocks: (0)
Discretionary Exit: (0)
ProSelect Stocks Reporting Earnings This Week: (0)
NEW ProSelect Stock LONG: NONE
NEW ProSelect Stock SHORT: SPLK
[MARKET RISK RATING]: This information is provided as a guide to market's risk of a correction and is based on the S&P 500 index. Even the best setups will fail if the general market is weak, so the rating should be considered before buying stocks. Buying a stock when the market enters a correction greatly increases the risk of being stopped out of a trade. The risk is rated on a scale of 1-5 stars, with 5 being relatively high risk and 1-2 stars being relatively low risk. If the rating is high and the market makes a strong advance, the rating will be reset. If the marker undergoes a correction, it will be reset after the correction ends.]
Market Direction Category:
[MARKET DIRECTION CATEGORIES]: This information is useful as a gauge of the bullish or bearish strength of the market based on the intermediate-term trend. Long trades are best initiated in category 1 and short trades are best initiated in category 4 (See the full explanation at the "download" department of the website.) The categories are 1.) Bullish under buying pressure, 2.) Bullish under selling pressure, 3.) Bearish under buying pressure, and 4.) Bearish under selling pressure
Important Disclaimer:
The information presented in the ProSelect Stock Report is for informational purposes. The information was based on data and charting programs from independent services and CC Trader LLC d/b/a TradeLikeaPro does not guarantee the accuracy of the information used in the analysis of securities presented. The information is not offered as a guide for trading ideas and setups. Investors and traders should conduct their own independent research before making any investment. Nothing contained herein should be construed as an automatic recommendation to buy or sell any listed security. Investing and trading involves risk. Before deciding on any investment, you should consider your investment objectives, level of experience, and risk tolerance. Do not trade with money you cannot afford to lose. You should seek investment advice from a professional investment adviser before engaging in investment activities.
Traders should check numbers for accuracy before relying on them for trading decisions because typographical errors will sometimes occur.
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