Review at New Highs

Despite more early week volatility, the SP500 was able to set a new closing high on Thursday and held those gains heading into the close Friday. This is the most productive action we have seen in some time. While there are cracks appearing, the price action continues to suggest higher prices in the near future.

A pattern this market has enjoyed recently is the "trap" trade. Breakdowns below key support that should indicate a trend shift seem to just snap right back higher; Breakouts are being sold causing any sort of sustained momentum to be missing. Its been choppy and sideways for months, this is often the case before a new trend develops. If we are seeing a new trend emerge, sustained momentum through the resistance band between 2,115-2,126 will be needed soon. We also will want to see this prior resistance become support on any pullback that occurs post breakout.

SP500 Ascending Triangle Breakout Daily chart

While much has been made about a top for stocks the SP500 has been carving out a typically bullish formation. This pattern is an Ascending Triangle and is formed by a flat resistance level and higher swing lows. As price moves closer to the apex the range tightens creating a "loaded spring". This spring precedes a strong move in one direction or the other.

I say "typically bullish" because an Ascending Triangle more often resolves to the upside. But as we know nothing is certain with the stock market. We have to assume with the weight of price evidence that this will continue higher, but if it were to turn lower from here 2,080 is quickly becoming my line in the sand. A break below that would likely cause a fast whoosh lower after the failed bullish pattern.

SP500 MACD (for trend health indication)

I use the MACD indicator for trend health, not buy/sell signals as many do. In a strong trending market the MACD line will not break below Zero during pullbacks. As you can see over the past 6 months, every pullback in the market breached the Zero MACD line. Each subsequent rally back was then followed by more volatility. If the whippy price action didn't convince you of a lack of trend, the MACD confirmed it as well. What this means is that any inital rally attempt after a Negative MACD reading is highly suspect and should be treated with caution.

Something I find notable about this new move higher is that this is the first time the MACD did not violate Zero prior to its bullish crossover. This is another reason I feel more confident of the new breakout attempt and possible new trend developing.

With the market finishing at new Daily and Weekly closing highs it is a good time to review our Lg-Cap holdings to see where we sit currently.

First of course will be our laggards:

Exiting PCG Daily chart

I may have jumped the gun here and sold. I waited all this time and then may have been shaken out. Only time will tell. But the stock made new YTD lows and sliced through what had been key support since March. Wednesday I made the call to cut PCG. We will just have to wait and see if this can regain its footing and make another move higher through the ~$54 range highs. 

Fortunately we still walked out of here with a 3.4% gain, but it certainly was a disappointing trade considering how it started. 

FB

I thought FB put in a very constructive week. While our stop was tested last week and early this week, by Thursday it received a strong push and regained both our key support level and 20 WMA. I'm happy with how its continued to dig in at $78. As long as that level is intact I see no reason to sell here.

CSCO

CSCO announced earnings this past week and reported a fine quarter. The stock initially sold off on the news but was able to quickly recover and close near the highs.

Looking at the weekly volume, this is what an Accumulation phase looks like. The largest volume bars are coming on the positive weeks showing buying interest is greatly outpacing selling interest. I'm pleased with how this continues to trade.

TWX

Time Warner continues to coil and sit just below multi-year highs. I have to think a breakout is imminent. We are able to trail stops up to the lowest close of the past 10 weeks and feel a break of that support would be enough to look elsewhere. Above about $82 though, I expect an upside resolution.

WFC

Wells continues to hang out at highs as well. Every swing low is more shallow than the last and the $56 resistance area is being bombarded regularly. Signs point to higher prices in the near future.


"In the Green". Our remaining holdings are all showing profit and holding key support areas.

AIG

AIG faded along with most of the Financial space on Friday. The swirling uncertainty of interest rates finally went the other way this week. For over a year rising interest rates were a forgone conclusion. But this week showed that maybe that theory is not so automatic. Maybe it is maybe it isn't, that doesn't concern me. AIG is still well above its prior highs and in full breakout territory. It will take a move through its breakout level and the swing low at $54 to make me reconsider this position.

GS

Goldman dodged the Financial related weakness and powered to higher highs. Along with JPM, this has recently been the best performing stock in the XLF. 

GILD

GILD is quickly becoming my favorite setup. It has seemingly found a floor near the $100 level and is beginning to move away from the tightening price action of the last year. 

I hold the position in several accounts as GILD shows fantastic fundamental metrics, a very strong chart setup and low risk opportunity. 

AAPL

AAPL is maintaining its trading range between $133 and $123. Our stops are right up against the lower support as the stock has seen stronger than average selling recently. If support at $123 were to break I would prefer to protect capital first. 

Currently the stock is in a clear uptrend and there is no reason to get cute. We will run the position until we get our signals. 

HON

HON busted through its all time highs this week on stronger than average volume. The move was great, but we have seen this before. HON loves to give false start signals. 

Bottom line though the trend is in great shape and as long as it keeps making higher highs and higher lows we will stick with it.

BA

BA showed a little more bounce after last week's test of our stop level. It's still not out of the woods yet, there is a band of resistance at about 149-148 that has been acting like a short-term ceiling. If that were to be broken to the upside I would feel much better about the setup going forward. 

DIS

DIS seems resistant to the idea of pulling back at all. The stock just continues to grind higher and any small dip is being bought right up. For now stops near $103 seem plenty far away from immediate danger. But I would expect some consolidation in the future to test the Bulls resolve. 

SBUX

SBUX is trading simarly to DIS and there is simply nothing to do until it can form a new level of meaningful support. Our stops are out of the way and the trend is higher. What else could we ask for?

BMY

BMY appears on the verge of making new highs soon. After an orderly pullback the stock found support right at the rising 20 WMA and we will trail our stops to that level. Should this turn south on us we will still be locking in strong gains as our cost basis is in the low 50's. 

UNH

UNH put in quite the shakeout move on the Daily charts over the past few weeks, yet it now seems ready to resume higher. If you only look at weekly charts you wouldn't really have much to worry about here, the test of the 20 WMA and subsequent bounce is pretty standard for this stock. What a beast. 

All our stops are nicely tucked in and in fairly aggressive locations. Should the market provide another shakeout move and break lower we will be in a position to exit with preserved profits and only a couple very small losses. This is where we want to be. The ability to let winning trades run while limiting downside risk is my edge as a trader.

GL trading! -ZenTrends 

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