Primed for a shakeout

SPX Daily

The S&P500 cash index closed down on the day and then futures moved up a little to close out at the same level as Friday (1402ish). There are some mixed signals out there, but I'm thinking we will pull back a bit more tomorrow and possibly Wednesday. I'm trying to stay open to the idea of a push up to that 1420ish level on SPX, but I'm starting to think we might need a shakeout before heading up there. The potential levels of support I'll be watching in the futures are 1387ish (1390 on SPX), and then 1377ish (1380 on SPX). 1360-1370 on SPX is a heavy volume zone and I expect the bulls to make a stand there if we get that low. If the bulls gap us up tomorrow morning, I'll be on the hunt for short entries.

Intraday update

S&P Futures 30min

S&P futures have moved down since the cash market opened and have found support at 1394ish (again). We've been bouncing around between 1394 and 1402 for about a week now. It will be interesting to see if the bears can regroup and try again this afternoon for a push towards 1387ish (1390 SPX).

Intraday volume is pretty light so far and is suggesting we might have already seen the majority of the days range. It's indicating potential of a 7-10 point range.... and with the high of the day session at 1402ish, that puts a low target area of 1392-1395. LOD so far is 1394.25.

A Stock With Two Gaps: RAX

Gator's Chart of the Day: RAX



Some folks say gaps always fill ... I'm not one of them but in this case I'll go out on a limb and say one of these gaps will.

After reporting good earnings last week RAX gapped up and pulled back to a previous resistance level.  (Prior resistance has become current support.)  It can now go either up or down and fill a gap.  I like the upside move and I think there is a short term trade here.

The Trade
The stock can be bought between 52.66 and 54 with a stop just below 52.50.  If it falls back into the gap then I don't want hold it while it probes to find the next level of support.  The minimum upside target is 57.80 which would fill the early May gap.  Keep an eye on volume and only add if price is moving up with increasing volume.  When the stock stops going up and volume falls off move your stop up tight and let the market take you out of the trade.