Earlier today, BofA chief technician Stephen Suttmeier (who has so far done a far more admirable job of reading the chartist tea leaves than his predecessors, Stolper 2.0 MacNeil Curry who quietly left the bank) pounded the table [6]for the second day in a row why all rallies should be sold.
Looking at the S&P chart, Suttmeier said "the daily NYSE McClellan Oscillator got more overbought last week than it was at the highs in July. In our view, this suggests “dislocation” rather than “capitulation” and we continue to see the risk of retest/undercut of the lows."
[7]
Perhaps he is right (the last thing we need is another contra-fade indicator to replace Stolper 2.0: we already have Gartman) but what about those who avoid indices and would rather trade single names?
BofA has some ideas there too.
Looking entirely at the charts (so no fundamentals at all here, but in a market where the only things that matter is what Goldman tells the Fed to say, and when Virtu's HFT algos launch a momentum ignition program that is probably not that bad) Suttmeier highlights the charts of three stocks "that have improved and show potential for upside breakouts in an uncertain market: NLSN, PCLN, and CRM."
Nielson Holdings PLC (NLSN)
NLSN builds a bullish triangle base from July 2014 and with recent relative breakouts vs. the S&P 500, the stock has begun to show leadership. The relative breakouts are a potential leading indicator for NLSN. A sustained move above the $49 area is the technical catalyst that completes the base and favor upside to $58. The chart structure remains bullish while above $44.00-42.80.
[8]
Priceline (PCLN)
PCLN is building a bullish head and shoulders continuation pattern and has begun to emerge as leadership vs. the S&P 500. A sustained push above $1375-1395 is the technical catalyst that completes the head and shoulders and favors a stronger rally toward $1750-1775. Holding above 1174-1103 maintains the bullish setup for PCLN.
[9]
Salesforce.com (CRM)
CRM is breaking out relative to the S&P 500 to show leadership in an uncertain market. The absolute price pattern is a consolidation within an uptrend and we think that CRM is set up for a breakout and upside into the $80-85 area. Holding $70-66 keeps the potential in place for an upside breakout above $73.00-74.50 that would confirm the bullish pattern and upside potential into the low $80s.
[10]
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Not feeling the bullish vibe? Then here are three stocks which BofA believes have bearish setups:
"Below we highlight the charts of three BofAML Underperform-rated stocks that have bearish setups with deeper downside risk: GPS, SNDK, and URI. The Gap (GPS)"
The GAP(GPS)
GPS shows absolute and relative weakness. The 2-year top remains in place with risk below nearby support at $30 toward the $25-23 area. The pattern remains firmly bearish with the top breakdown intact while below the $33-36 area.
[11]
SanDisk (SNDK)
SNDK stalled at the falling 50-day moving average and downtrend line from late May. While below the $54-57 area, the downtrend remains intact and the risk for SNDK is lower with the August low at $44.28 and projected channel support near $40-38.
[12]
United Rentals (URI)
URI is breaking down within an absolute and relative downtrend vs. the S&P 500. The stock stalled near the falling 50-day moving average and is completing a potential bear flag that favors a deeper decline with the August low/falling near $57-55 and the pattern projection near $44-43. Holding below the $74.92-76.84 downside gap and the big breakdown point near $81 is keeping the bears in control on URI.
[13]
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It goes without saying that all of the above trades are the functional equivalent of playing roulette in a rigged casino (a casino where the HFTs win 100% of the time). Which is why the best "strategy" may be a test: a pair trade going long the "longs" and short the "shorts" - if it is profitable, great. If not, then we may have a potential Stolper 3.0 on our horizon.