Let’s See if This Has Legs

I am still sitting in full cash this morning, having closed out shorts yesterday amid the crash-tease-then-violent-reversal (for the second day in a row).

On the one hand, we are looking at a holiday-shortened week with Passover and then markets closed for Good Friday. So, bears usually back off the action during the holiday trading and let bulls have a mild bounce. That is just one reason why I covered yesterday.

But instead of immediately flipping long, I am mindful of the still-damaged charts out there, especially in the leaders. Just because some stocks and sectors have temporarily stopped going down does not make them easy or even high probability swing longs.

I know the big talk now is that the Nasdaq will rally to form a “right shoulder” in the coming weeks to form a massive head and shoulders top dating back to last December. I think that scenario may be a bit too obvious.

To my eye, that busted rising channel since November 2012 on the Nazzy, seen below on the weekly, remains the controlling pattern until effectively countered by bulls.

In other words, I still believe rallies are to be sold, if not until early next week after the holidays.

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For all of those plentiful “hammer” potential upside reversal candles printed on Tuesday, of course upside confirmation is key for any type of short-term bounce.

But a more pertinent issue, if bought on Tuesday, is that you know have a well-defined level against which to trade. No one knows for sure if this is a major bottom or instead a 2011-style trap which will crash lower.

Either way, we do know with clarity that a stop-loss on a name like NetSuite just below $77 makes sense, below the lows of Tuesday’s hammer, seen on the daily chart. A more conservative trader can place the stop below the midpoint of Tuesday’s hammer.

Which stocks are at the top of your watchlists this morning?

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In the event we see a vicious rally for the rest of this holiday-shortened week, here are some actionable long ideas which are heavily-shorted.

Please click the screen shot below for a larger view of my “12631 FINISH HIM! SHORT KILLER SCREEN” inside The PPT. Obviously these stocks are going to have the highest percentage of shorts and, according to the algorithm, are set up well to squeeze further.

If this bull goes buck wild, this is a great idea screen.

Members can click here to view and save it.

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Into upside follow-through from Tuesday’s reversal, I consider RRC to be the best long idea I see in the tape right now for my style of trading.

On the daily chart, below, note the well-defined sideways base dating back to late-January. Energy stocks have been hot of late. And I expect this one to benefit with a move over $90 for a major coiled spring breakout higher.

Overall, bulls want to see the vast array of upside reversal candlesticks on Tuesday confirm higher on major buy volume.

If we see the midpoint of Tuesday’s range lost on the major averages, however, make sure you have concrete stop-losses in place to avoid a summer 2011 waterfall.

Drop me your top tickers overnight.

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If you enjoy my blog posts and videos, then I would encourage you to please click on this 12631 hyperlink for more details about joining our great team of traders at a very reasonable price. 12631 is a trading service which @RaginCajun and I direct here at iBankCoin.

Enjoy tonight’s video, and enjoy your evening. 

Direct Vimeo Link Click Here

I am 100% cash here, having covered all of my shorts and closed inter-market positions out as previously noted here and inside 12631 earlier today.

There are now some very important technical considerations in play here, all of which I will discuss in detail in my video market recap after the bell today.

See you there.