Morpheus Trading: A recent false breakout in a current long position in iShares Philippines (NYSEARCA:EPHE) has led to a pullback to the rising 50-day MA. A three to five bar shakeout is normal after a false move to new highs, but the price action should hold up here for the setup to remain intact. The longer it takes $EPHE to reclaim the 50-day MA the less bullish we are on the trade:
Our current long position in Dow Jones US Home Construction (NYSEARCA:ITB) has also pulled back in after a failed breakout above a prior swing high. Although last week’s candle was wide, volume did not pick up.
The 10-week MA is still pointing higher, so if $ITB can hold the 40-week MA the setup will remain intact. A breakdown below the 40-week MA would signal that the pattern needs more time to develop before heading higher:
Michael Kors ($KORS) is in bad shape after breaking the 40-week MA on heavy volume Tuesday. This setup is clearly no longer in play and will take several weeks of consolidation to work off this week’s selling, especially if it closes near the lows of the week. Do not attempt to catch a falling knife here. How retail stocks react over the next two weeks to $KORS selling will be key.