Energy is really struggling here this morning, which is keeping the broader markets from making any more advances. It would actually be a positive for the market to churn sideways for a few days.
That would set us up with a nice tight channel to play the break either on the long or the short side -- depending on which side breaks. I would simply follow the direction of the break. We don't have quite enough yet for the scenario, but we are very close.
Staples (SPLS) made a nice push to start September. It now has a bullish flag pattern forming, which would trigger on a close above $13. The momentum is strong and the dip in the RSI is nothing more than a reflection of the flag consolidation. A close below $12.60 for two days in a row will invalidate the bullish flag pattern and set this one back into a neutral position. SPLS is interesting, but it led me to another name: Steelcase (SCS).
I admit that it this office furniture and setups company is not exciting. The fundamentals are "meh" so why look at it? It's all technical on this one. The office retailers have been catching a bit, so my thesis is that will trickle down. SCS isn't a buy yet, but look at the short-term chart. A close above $16.05 should set up a nice squeeze from an ascending triangle and could push a gap fill to the $17.50 area. I can take this one off my watch list if it closes below $15.65.
I expect to have an answer this week, so I don't anticipate this that this name will monopolize a lot of my time. The momentum is poised for a breakout and strong enough for traders to be focused on the long-side breakout. The downside isn't enough for me to be interested on a short play -- even if we see a close below the triangle.
Krispy Kreme Doughnuts (KKD) has been in the penalty box, for the most part, since June. August treated the stock a bit better, but now it looks set to complete a gap fill up to $19. The momentum, moving averages and money flow are all clicking along with the price; however, this one needs to close over $17.50 today. A close over that level will have me buying shares with a $16.75 stop.
I anticipate risking around $0.75-0.85 on the downside for a $1.25 to $1.50 upside potential. Given how strong the chart has been of late, I'm willing to take that position, even with the stock trading near market highs.