Stocks digested the big move of last week with modest losses Monday as the S&P 500 fell 0.31% and NASDAQ 0.09%. This is positive action in light of a huge move - a market can either digest gains via time (more or less move sideways) or price (drop). Either is ok, you just do not want to see tremendous givebacks or immense volatility during the digestion period. That doesn't mean the market cannot go up - we saw that in June/July 2012 when European headlines drove the market in every direction - eventually the move was up, but it was a hectic atmosphere. There was little in economic news to drive markets one way or the other, a welcome relief from months of day to day headlines.
Both the S&P 500 and NASDAQ have formed bull flags of sorts, in that after a huge gap up post fiscal cliff agreement, they have traded in a relatively constrained zone and not given back even half of that move up. The NASDAQ chart is better represented below as the stockcharts.com version of S&P 500 does not show the gap up, which is an important thing to be aware of.
Tonight, we'll post some charts of stock ideas from Dan Zanger (these were from Sunday's newsletter), and we'll do a little compare and contrast on a few. First idea is Facebook (FB), which finally has stabilized after a rocky year post IPO. It recently had a descending channel, from which nice breakouts can occur. The test is usually the old highs which in this case was $29. Zanger's chart from yesterday:
So what happened today? There was a clearance of that $29 level - if that holds go forward it is a very attractive pattern.
Next we have Equinix (EQIX) which has a very similar bull flag formation as the NASDAQ and S&P 500, here is Zanger's chart from Sunday where you see the bull flag. Today it broke over the top of the top of that flat in the mid $216s. For aggressive momentum players holding that level is key, for those who are simply playing the bull flag a looser stop at the bottom of the flag would be their pivot point.
Last we have one of the market's favorite groups of the moment, 3D printing - Three D Systems (DDD). From Sunday see chart below - and the stock gained another 2.8% today.