Market Thoughts - Week of 7/13/15

For the past four months, the overall market (as represented by the SPY) has been trapped in a range between roughly 204 and 214, which has created choppy conditions and a lack of any trend in one direction or the other. Considering the bull case, the 204 area on the SPY has proven to be a strong area of support, with the SPY finding buyers in this zone again last week. The market hasn't violated the long-term uptrend it's been in over the past 5+ years, and a bit of price consolidation is to be expected after such a strong move off of the lows in 2009. On the other hand, taking a more cautious view, the 10-day, 20-day, and 50-day moving averages on the SPY are now sloping downward, indicating that the index is in an intermediate-term downtrend. In addition, price is now firmly below the 50-day moving average, a level that bulls would like to reclaim sooner rather than later.

With these overall market considerations in mind, here are a few stocks that are bucking the weakness seen in the indices and appear to be operating in their "own world":

FIT is a recent IPO that has managed to build a nice short consolidation below its highs. The stock has been resilient in the face of a challenging overall market. I'd look to enter should FIT take out its highs from 7/9 of 44.00. 

STMP is forming a 9-week base that has seen volatility contract along the right side of its consolidation. A breakout would take the form of a move above the 6/24 high of 75.37.

RCPT is similarly experiencing a contraction in volatility as it climbs up the right side of its 14-week base. Contracting volatility is one of the primary features that I look for in a setup, as it indicates supply from sellers is increasingly drying up, which signifies that pressure is beginning to come off the stock. I'd look for a move above the 7/7 high of 200.00 to get involved.

Given the less-than-ideal overall market environment, any positions I take on the stocks mentioned above (or any other stocks that set up over the course of the week) will likely be light. In challenging markets like we find ourselves in currently, I'd look to risk between 25-40 bps of my overall account size on any given trade.