Market Still Within Trading Range

Until I see a move towards one of the extremes of the trading range, I won't be trading the S&P 500 and will focus on individual stocks setups.

Playing the Breakout Trading Range: IPHS

IPHS broke out in early August and is now developing a trading range between the breakout highs and lows. This has created a low risk set up. I would like to buy on a pullback to the $33-35 range with a target of $40 and a stop around $31-32.

Overall, the stock shows a nice volume pattern, stochastics are oversold and we have a nice uptrend in place. The only concern is the negative RSI divergence. This may set the stock up for failure on a retest of highs. Since that is the target, the breakout trading range trade still looks good.

Homebuilders are Hard to Ignore

It's tough to ignore the strong move in residential construction, aka, homebuilders. While my head tells me to stay away, the charts tell me otherwise. For months I have been using bounces in the sector to reload shorts, but not this time. There is something different about this bounce.

Take a look at the chart of Toll Brothers. A few things jump out at me:

1. The stock is no longer trending down. Rather, we see a range bound price movements with resistance around 24.

2. RSI is improved. The mid level is acting as support, which is what happens in strong stocks.

3. OBV is improving. Volume patterns seem to be shifting from sell to buy.



I would not buy here. In a range bound market, I like to make buys at the bottom of the range or on breakout. A patient well timed entry could lead to nice profits in TOL.