bears BEWARE of the bullish island reversal

$SPY bulls stepped up to the plate and confirmed last weeks rally by breaking us out and above the previous 167 resistance level and into the gap. But most importantly notice we have a new open gap thanks to Tuesdays action that remains to be unfilled and coincidentally lining up with the previous gap from 8-15-13. What’s this mean? We effectively created an island bullish price reversal higher leaving behind nearly 4 weeks of trading lower prices. This is typically a very powerful signal and this is one I am fully ready to embrace so long as we can hold onto this recent open gap. Coming into next week I will be looking for long setups in strong stocks and recent leaders.SPY1Monthspy15$AAPL brutal action if you were a long shareholder this week in Apple. I don’t want to get into the fundamental details of the recent company product announcements but you can clearly see what market participants thought about it. When I see a $20 gap in a stock like Apple all I can think about is how the majority of the shareholders were comfortably long or perhaps overly speculating about imminent future upside. When everyone is on one side of the boat its much easier to tip it over and this is precisely what we saw this past week in Apple. I posted about Apple on Thursday so please check out my post why todays action changes everything for more detailed analysis on where I see this going.aapl15 $GOOG not a very bullish looking pattern in Google this week. Putting in a mild rounded topping pattern that could be ripe for a leg lower if price broke below this 885 support level. Now of course you need to keep the market in context here and I do relatively like the setup we have in the broad markets so if you think we are going to hang in there and not attempt to fill last weeks gap in the $SPY then 885 might prove to be a great spot for Google to hold and lift out of. Time will tell, but it certainly was not the leader this week. goog15$NFLX well here we are finally at new all time highs in Netflix. What a monster this has been year to date. Tuesday was one hell of a strong bullish day giving us that new all time high. For the rest of the week we saw a nice steady flag like pullback into the nice round 300 level until Friday where we saw the bulls taking back the reigns again and breaking out of the descending trendline. I picked up a  long position around 300.95 on Friday looking for a retest of the highs and then possibly a new leg higher to all time highs. If we break back below 300 and hold down there it will get me much more neutral on this name and out of my long position.  nflx15 $FB playing some ping pong this week in a new range $43 – 45.50 but overall this name still looks great to the long side. These stocks at or near all time highs are exactly the candidates you want to gravitate towards if you believe the market is continuing higher (I do) and I would be looking to buy all dips in facebook until it starts breaking support levels that it otherwise shouldn’t. In this case, I think Facebook is a great long above 43 and below there would get me much more neutral.fb15 $AMZN very similar look to Google this week with that potential rounded topping pattern. Both have had strong runs recently and it’s not surprising at all to see them consolidating those gains for a bit before another leg higher. I am still very bullish on Amazon and the action this week is not bearish by any means I am just being open to the possibility we could see a shallow leg lower creating some sort of higher low before resuming to the upside. Time will tell, not trying to predict either way.amzn15 $TSLA these ranges are tightening up here for this 2013 market leader and its one of the longest sideways channels it has been in all year. $160 to $173 (all time highs) is the current range it is sitting in and a break either way should result in a fairly sustained push in that direction. Perhaps we are finally seeing some distribution in Tesla, I personally would not place a bet on it but until we see a breach one way or the other I will remain neutral to cautiously bullish. This will be one of the top stocks I will be monitoring this coming week because I do believe this will resolve soon and I want to have a piece of it.tsla15

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Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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