market breakdown confirmed – caution ahead

$SPY in last weeks recap, divergences accelerate as growth stocks tumble, I outlined the growing significance of this nearly 2 month range in the SPY spanning from 184.50 to 189. After a sneaky bull rally immediately following the FOMC minutes was given entirely back the following day we were setup for a break of this multi month support.  This was a quick move and it was easy to stay caught up on Wednesdays rally and not get rid of positions if you were not prepared and realizing what was happening. Take a look at the past two weeks and look how bears have been quietly ramping up their activities for the first time since early February of this year. Now that we have a freshly confirmed breakdown of this range I think it’s time to start laying out some potential targets on the downside. The first very realistic one I am looking for comes in about 177 or nearly 4.5 pts lower from where we closed on Friday. But as always we should consider both the bull and bear side regardless of our own thoughts or opinions. The bulls need to reverse this action fast if they are to prevent further bleeding. Reclaiming the breakdown level at 184.50 would be big and ultimately getting back above Wednesdays fake-out highs of 187 would really negate the breakdown in my eyes. The longer we stay below the breakdown level with all that heavy overhead supply above us the more trouble the bulls have in the short/intermediate term. It’s time to play some defense for you swing and long term holders. It’s also a great time to shorten those timeframes and look for intraday trading opportunities amongst this elevated volatility. I encourage you to check out my real time trade alert service for trade ideas and daily cash flow opportunities which had a very profitable week despite the tricky action.

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$AAPL still sloppily trading around this larger range for the better part of two months. We closed Friday right around a pivot low we put in towards the end of February and if the bulls cannot hold on here it seems likely we are going to break lower and possibly retest the big round 500 mark and post Q4 13′ earning lows. 515-535 is the immediate range I am watching.

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$GOOG broke down from this rising channel last week and it remains weak after giving back all of the bounce it tried to stage back into the 560s. This is a pretty important support level for Google to hold onto otherwise the next real level I would look to for support similar to our friend Apple would be the $500 mark. For the bulls to make a stand and try to put in a good basing pattern they really need to reclaim 560.

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$NFLX continues to bleed lower in this falling megaphone pattern. Lower highs and lower lows in a volatile but orderly pattern. Looking at longer term charts this 320ish level should try and offer some decent support, below there and again we could see more sliding action. Not interesting at all here for longer term positioning, still just a broken day trading vehicle.

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$FB one of the few high growth names that did not close Friday on the lows of the week. We can see some signs here in Facebook that there are some early dip buyers interested below $60 however this chart is still very volatile and generally sloppy. Had some nice day trades in this name this week taking advantage of the elevated volatility but as with most of these beaten up names I am not seeing any evidence that suggests a high probability swing setup.

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$AMZN continued its orderly slide this week in a well defined falling channel. The selling in Amazon is one of the most ‘orderly’ sell offs in this space. It closed Friday right around the lows from the previous week at 315 giving it the potential to begin carving out a range from 310 to 330 which ultimately would be a step in the right direction to constructiveness. Not interested in it much one way or the other, above 316 or so could be worth a day trade to the upside for a few points.

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$TSLA trying to cling on to it’s $200 handle Tesla closed out the week essentially on it’s lows and at the lower end of this multi week support level. Pretty well defined head and shoulders pattern here with the neckline right around 202. Keep in mind the longer term chart of Tesla is still one of the best amongst it’s high growth peers. It really has room down to about 185 before the longer term trends become questioned. Bulls have got to get this above 220 to save this impending breakdown.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 20+ 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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