Healthy Pullbacks

As mentioned recently in a prior report,  The Markets seem to breath in and out with human interaction.  They can Ebb & Flow like the ocean, and  some pullbacks can be very healthy , giving the upward move more energy to break above resistance.  The picture above shows the idea of a pullback that has done its job. SO in this report I wanted to discuss certain pullbacks that can be buying opportunities, and of course there are some that aren’t. Lets do  a market review…

NASDAQ– This was my chart for yesterday, I mentioned that a pullback usually occurred with the little move that we saw on Monday. It too could be a healthy little pullback.

So we did dip yesterday,  lets take a look…

Note: I will have to proof read & correct anything worded wrong or typo after releasing this due to time. please excuse typos 

I still see bullish chart set ups inside the Tech Sector, but This dip actually looks a tad deeper  than the lower trend line.  If it recovers today it will likely run to the upper blue line. If not , the selling could pick up,  the RSI is close to a break down. (Caution for the moment)

I’ve been talking about the Bearish rising wedges in SPX & NASDAQ that often lead to deeper sell offs. I want to point out that even if we get a “SELL IN MAY & GO AWAY ” sell off, it could just be a large healthy correction for higher prices in the fall. THIS is an idea of how that could play out.

The SPX –  Bigger Picture.   It is really struggling in this area, going sideways for 5 months. A healthy drop could give it energy to break higher later.

WTIC–  Oil continues to look great!  Even if it pauses and pulls back at resistance,  it would likely be a healthy pullback.

NATGAS– stare at the OIL chart above and if NATGAS does something similar when it gets going, it wouldn’t surprise me.   It may go Step by Step as it hits resistance on the way.

So the XLE did a bearish engulfing . They usually mean lower prices for the XLE, but that doesn’t mean that all energy stocks will drop, or that it will be deep. A healthy sideways pullback  could look like this

I also saw a BULLISH engulfing on the ERY– so I sent out an alert to point that out .

Also Not all Energy stocks will fall, just because the XLE is looking like a reversal.  Many Energy stocks  seem to be moving / performing as individual stocks.

XOM is big and can influence the XLE. Notice a reversal in XOM, and also that as an Energy stock, it hasnt moved much off of the recent lows.

SDRL– this stock is Strong and has less resistance . This is why I stated in the comments that I would hold some REXX through earnings , I like the REXX inverse H&S pattern.

 I want to point out something similar to that in the Precious Metals Sector.   GOLD (Using cycles) was Left Translated.  That simply means that it reached its peak early in the first half of the cycle, and is supposed to indicate that it was weak and will remain weak.

GOLD–  Peak on day 13 out of 27  or 32 days, so it indicates possible weakness after the peak.

HOWEVER- Note to ChartFreak Readers:  look at GDX. No matter how you count it out, it Peaked later in the daily cycle.  And when you look at GDX you see strength in the form of an uptrend.  So some say you must go by GOLDS CYCLE in the Precious metals area.  I say that individual Miners are looking bullish and can be traded / accumulated until they break down. I use technical analysis with  cycles,  but I go by what I am seeing and as I have stated,  I am seeing accumulation and great bases forming in the Miners.

GDX – Cycle counts .

1. Picture a day 14 DCL. Peak on DAY 10  Right Translated  (indicates strength , peaking in the 2nd half of the cycle)

2. Picture using day 29 as the DCL.  Peak would be day 25, Right Translated indicating strength.

3. GDX is in an uptrend

GDX – had what looked like  bearish engulfing into the close , that indicates selling pressure and usually lower prices follow.   I sent out an alert mentioning that.  GDX Futures are higher,  so it is either remaining strong, or will sell off into the close.  This could just be 1 of those  healthy pullbacks.

SILVER –  still looks healthy above the 50sma , divergence at the lows, etc

I need to release this, it took a tad longer than expected and its getting late, so I just wanted to point out 1 trade idea.

Remember when it was announced that relations with CUBA would change?  I saw cruise ships POP and other areas that would benefit from an increase in trade with Cuba.  I wrote a few ideas down , because buying the rumor (Pops on rumor) will kill you, but after the dust settles, you may see something interesting.    Well on that day I saw this stock ROCKET HIGHER  $6+ to $14+ immediately.   It went on the “watchlist”.

CUBA-  It is settling down and has become very trade-able, but also it could simply end up in the $20’s in time as it continues to find support at the 50 sma.

Futures are up all over the place,  but we know that Gaps open can close an continue down, so I usually allow the 1st hour of trading to settle down and get an idea of what may be happening. I may add to certain energy stocks that have released earnings already, since that sector remains strong.   BAS is an example of post earnings strength,  and REXX may be next?  Someone said  SFY releases last night, but I have it as Thursday  may 7 release, so be aware of that if you own it. Best wishes and happy Trading!

~ALEX