Wednesday, April 09, 2014

Rally Attempt Continues Volume Dries Up

The market followed through on yesterday's reversal, opening higher, and rallying for the remainder of the day. Closing up over one percent, and near the highs of the day.  Unfortunately, volume was lighter, and below average, throwing early suspicion on the rally attempt.

For the second day in a row, leading growth stocks outperformed in above average volume. Few have been able to break out to new highs, but many are attempting to break through, or bounce off moving averages. Some setups remain, but the risk is increasing of a shakeout, especially, if the market has another big up day.

Good chance short positions have been stopped out to protect profits or prevent from larger losses. Like leading growth stocks, few short idea setups have broken apart, most continue to consolidate within their potential setup zones.

Aggressive traders who entered long positions over the last two trading days, should have small profit cushions. With leading growth stocks making little progress, even after today's strong gains, traders should be on a short trigger to tighten stops, but also on the lookout for strength on shakeouts to add new positions. If volume begins to dry up as leading growth stocks bounce off moving average or increase with no meaningful appreciation (stalling), chances are, another shake out is brewing over the next week or two. Not enough evidence yet to force taking profits and moving to cash.


Energy XXI (EXXI) continue to try and roll over at the fifty day moving average. The stock continues to tighten into the fifty day moving average in lower volume. Look for a break down below the recent down trend line. The stock could drop over 25% to the next support level around $16.

Ocwen Financial (OCN) rolled over from the fifty day moving average the last few days as volume increases. The stock has paused, and shuffling sideways toward the fifty day moving average in lower volume. A reversal back down, could finally break the stock lower towards fifty two week lows.

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