Stocks bounced higher on light volume Friday with the S&P 500 and Nasdaq Composite closing back above the 50-day MA. Total volume was about 10% lighter on both the NYSE and Nasdaq exchanges. The recent volume pattern of heavy volume down days and light volume rally days is bearish, and typically not the sign of a healthy market.

At the very least, the price and volume action of the major averages will need a bit more time to consolidate to digest the recent selling action (which could be a few more days or a few more weeks).

The Nasdaq Composite is currently testing a key support level from prior base highs and a rising 50-day MA (around 4,490):



We expect more volatility from the Nasdaq this week, especially if it is to find a tradeable swing low and eventually push higher. We look for a undercut of last week's low as a test....will the 50-day MA hold up by the end of the week?

Our combo scans, where we look for strong fundamentals along with top relative strength rankings did not produce much in the way of low risk entry points. That being said, conditions can change quickly, as it would only take one bullish reversal candle on heavy volume to generate a buy signal in a stock that is trading at or near a decent support level.

Stocks that may be in play this week if the market is able to find traction include: PANW TKMR ANET LOGM KITE MOBI NEO BLUE LOCO TUBE MOBL.

As always, we will notify Wagner Daily subscribers with our exact entry, stop, and target prices if any of these stocks meet our strict criteria for swing trade buy entry.

Overall, the short-term plan is to lay low and wait for new setups to emerge, which could be within the next few days depending on how the broad market action plays out.

If the market holds up, then we will look to add more exposure. If the market breaks down further from here, we may move to 100% cash if current long positions do not hold.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.