Actionable Trades: SPY, XHB, XLI, CMI, VMW, VNO, ARMH, QCOM, RVBD, NFLX

Today the Head and Shoulders pattern in SPY triggered.  The target area of this move is $120-$117.  Last Thursday's note stressed that cash is best for the time being, as terms of the debt ceiling were uncertain and the SPY was breaking the $130 support level.  Hopefully you took the suggested advice as you would have saved yourself unnecessary losses.  The market has now had 8 down days, the worst losing streak in nearly 3 years.  The SPY is now trading below the 200-day moving average, which it has not done since last September.  The action has been fast and furious to the downside.  QE2 is now over so markets are able to close on the lows as the 'Plunge Protection Team' is not there to step in and save the market.  First level to test an oversold bounce is $125.28, which is the Japan crisis low with more significant support at $122.  For the active investor, cash is king, and for the active trader, look for an oversold bounce, if the market opens down tomorrow. 
    

 

Below are charts of the XHB, the homebuilders ETF, and the XLI, the industrial ETF, that have a Head and Shoulders pattern that have triggered and on the way to the measured move.      
   

   

CMI, an industrial goods stock classified by diversified machinery, is forming a potential Head and Shoulders pattern.  The neckline stands around $93.  The composure of this stock is starting to change as it is now trading below key moving averages.  Keep this trade idea on the radar.  

  

Composure of the market is changing.  Something to be aware of, a lot of stocks that have been holding multi-month uptrend lines are breaking those support lines.   

VMW showed relative weakness to markets, which closed around -2.7%, whereas VMW closed -4.8%.  VMW closed below the 50-day moving average and below the break of the uptrend line. 

VNO, Vornado Realty Trust, is a REIT that had been performing well and was not able to break down in June when the market was in correction.  Today, VNO reported earnings and closed -4.8% and traded with force through the 200-day moving average and the multi-month uptrend line.

ARMH, a strong stock from last fall and earlier this year, is breaking an uptrend line.    

  

QCOM is starting to pierce through a multi-month uptrend line and closed through the 200- day moving average, which is $53.21  

RVBD, a previously targeted stock that broke an uptrend line on its earnings report and was bear flagging below the level.   RVBD has seen no traction to the upside since then and is creating another bear flag. Next entry will be a break of $27.70.

 

NFLX, a market leader, started breaking the upside momentum before the market.  Use this as a gauge for the market.  NFLX is creating a steep downtrend line as it pulls off from highs and it continues to hold the multi-month uptrend line.  Important to note, NFLX has not closed below support of the 100-day moving average in a few years.  The 100-day moving average in NFLX is $250.92. 

 

Actionable Trades: SPY, AAPL, OIH, AMZN, GS, GE, XHB

It looks like the Head and Shoulders pattern in SPY is coming to fruition.  The neckline stands at $127/$127.50, with a target area of $120-$117.  This morning we saw a big gap up in the market as there was some resolution to the debt ceiling, but the highs of the day were in at 9:30am ET, and the market continued to get hit after a very weak ISM number.  SPY traded below Friday's low and through the 200 day moving average, however it closed above both levels.  If this pattern is to play out, it would be nice to see some sideways action first.

 

AAPL is a go-to stock for strength after a blockbuster earnings report this quarter.  AAPL was highlighted last week for potential buy back areas.  It held the first area which was the low from its earnings gap and also the 10 day moving average.  AAPL showed a lot of relative strength today as it closed +1.65% when the SPY closed around -.65%.  It is always difficult to buy the dips when they present themselves, but that is why you must be prepared and know key levels.  For now, use AAPL as a cash flow stock as there is no real set-up on the chart and could be difficult to make new highs, while the market corrects.      
    

 

   

This ETF remains bullish as it trades above key moving averages.  One level to test a buy back is the 100 day moving average at $153.71 and then next level will be the 50 day moving average at $150.81.  The OIH's did put in a bearish reversal candle on the daily chart, signaling it may need a little more time before making another move.

  

AMZN, another go-to stock for strength, had been holding up well after gapping up to new highs after the earnings report last week.  It had a nice 3 day basing pattern that usually ignites another move higher, but failed to hold that new highs, although not unusual as the market was pressured today.  For now, AMZN is an avoid as it needs more time.  

 

GS had a powerful snap back two weeks ago when it failed to hold a new 52-week low.  Now GS is holding around the 50 day moving average and above the break of the descending trendline.  Something to note, GS did not break its low from Friday ($133.13) but the SPY did.  Use the $133 support level as the reference point.

 

GE is trading below the $18 support level, which is not surprising after we saw a big miss in the ISM number that came out at 10:00.  It was a full 3.6 points lower than expected.  GE is showing bearish signs on the daily chart as it trades below key moving averages and makes a series of lower highs.  

 

  

The XHB is the homebuilder's ETF.  For all of 2011, it had held the $17 level, but broke that Friday.  This head and shoulders pattern in XHB is very bearish.  The neckline stands at $17, which it closed below today.  This pattern has now triggered and targets a move down to $14.80, use your own trading rules to take profit on this trade.