Good morning! On Thursday we saw the correction we were looking for on the 15-30 minute charts following the strong rally from Tuesday afternoon and into Wednesday. Due to the strong upside move at that time, the market needed a chance to catch its breath. It could do that either by pulling back or creating a trading range. In this case it did so with a strong range on the 15 minute charts. The indices opened slightly higher before closing the gap and then returning to the prior afternoon highs. The divergence continued, but not by as great of a degree as earlier in the week. The NASDAQ showed the most intraday strength as the pivot off price resistance pulled the SP500 and particularly the Dow back to the lows of the prior afternoon's range.

It was a very good day for pivot trading on Thursday because the support and resistance levels held extremely well. Since the market was so extended to the upside going into the day, I found the pivots off highs to be the most endearing, although the setups off lows were more rounded and formed better reversal patterns on the 1-2 minute charts. In either case, however, it was a day for scalping when it came to the market as a whole.

I was initially more bearish going into the early afternoon before the move higher into 13:00 ET was at a much more gradual pace than the prior upside moves intraday on the 5 minute charts. The 13:00 ET resistance held perfectly and selling picked up going into the 14:00 ET reversal period. As that one hit though, it formed a small 2B reversal on the 1 minute charts by putting in a very slightly lower low which rounded off the prices into the support from the lower end of the trading range. The upside on this was rather rapid, making the market right back into the zone of prior highs once more. In order to see stronger selling into the afternoon, this 14:00 ET pivot should not have been as strong. When the market again reversed 30 minute later off highs we saw the first large intraday volume spike of the day. Again the support held and the market bounced. This show of strength with volume meant that the market would indeed continue to hold the range into the remainder of the day because the bulls were not ready to give up. As such, my bias became more bullish going into the last hour or so of the day.

If you look at a 15 minute chart of the Dow or the SP500, what you will see is that by basing throughout the day, the market not only showed the greater strength it had been displaying on the daily charts as accurate, but it also opened the way for another upside move. This is because most bull flag continuations to a trend move will correct or base a similar length of time as the prior correction. In the market this prior correction on the 30 minute charts began on the 16th and went into the 17th. The market equaled this correction going into Thursday afternoon, hence leaving room for a third wave of buying on the 30-60 minute charts.

The Dow had the best pattern for a continuation since it was the least extended as compared to the rally going into the 16th and the fact that its base was more conforming. The NASDAQ had an issue with slightly higher highs, meaning more trapped traders on each attempt. The one concern with taking the Dow over the SP500 and NASDAQ is the slower upside because it can mean that the Dow could give way to a reversal more quickly than the other two. Nevertheless, I am bullish heading into Friday morning on the intraday charts. I still do not favor conditions for new swingtrade longs in general, however, since the market has  put in an equal move on the daily charts already as compared to the rally from the first week of May and prior highs on the daily charts is looming as stronger daily resistance.

AAP from the $51.88 zone on the 25th is correcting a bit on the daily after two strong weeks. Highs of $59.53. Trailing stop initiated for position trades. May 18th earnings. ASKJ on the weekly charts has also broke higher. From last week, BBI long is also still of interest. VAR, ALGN and ADTN long all have broken out. VAR hit its 200 day sma on Thursday so very tight trailing stops initiated. Triggering a breakout just under $34, it has highs of $36.99. ADTN as short term trades have hit trailing stops and have 20 day sma support for longer term. ALGN hit stops by breaking Monday's lows. LCAV remains of interest for an upside continuation, but due to Thursday's weakness in DF it is removed from my watch.

Economic Reports and Events
May 20: -
May 23: -
May 24: FOMC Minutes (2:00 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
May 20: -
May 23: CPB(?)
May 24: CSC(A), GME (B), NTAP (A), SEAC (A), VOD (?), WSM (?)

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.