This is one of those days where the market feels "redder" than the indices are portraying. The SPDR S&P 500 (SPY) has achieved that $196-$197 zone again, which was a measured move from an earlier chart. This is the second go at that level. I thought the first one might be the cap, but here it is again. A second rejection at this level might embolden the bears a bit. It would clearly define a stop level should you want to take a shot on the short side.
The nice round number of $200 may beckon some, although I would certainly expect a quick rejection from that level simply because it is a round number. Sure, it is a pure psychology call, but it is in our nature to sell or stop on round numbers.
And there is nothing better than to use one of the $100s or 1,000s to sell. So, whether it is SPY $200 or 2,000 on the S&P 500, expect it to happen. I wouldn't expect a huge hit, but a 2% or 3% quick pullback would make sense.
I am still looking for some names that aren't extended and might offer a quick turnaround pop should the market momentum continue. Two names on the list this morning are recent issues: Rubicon Project (RUBI) and Lumenis (LMNS).
RUBI is certainly my preferred name at the moment. The company deals with automated advertising via a cloud-based application that matches ad buyers and sellers in real time. It has the magic word "cloud," which will draw in some momentum traders.
When we pair that potential with the breakout on the chart today, I think a move back into the $17-$18 area is very possible in the next three to six months. While I could see treating this one as a scalp or a one-to-three day swing trade, I would prefer to use it as a longer-term position.
By going longer term, I'll take a smaller position, but I can give my position a stop all the way down at $11.60. This should allow me to get through some of the potential intraday or day-to-day volatility on the name. I might consider a pullback to $12.75 to add some more to the trade, but I will maintain the same stop.
As far as medical equipment name Lumenis is concerned, I want to see the stock close above $9.40. I would be willing to grab some shares between $9.40 and $9.50 intraday as well. If I were to do buy based on the intraday move rather than the close, then the stop would be on a close below $9.00.
Again, I would prefer to take a longer-term swing trade on this trade, as I could use $8.35 as a stop on the downside and look for the upper $11s as a profit target. This would provide a similar risk-return to the RUBI trade. I do believe this one is still a few days away from being a buy, but momentum is starting to pick up. LMNS will be near the top of my watch list.