Summer Chop

With the S&P falling over 1.8% Monday on increased volume relative to Friday, the market continues to indecisively wander between 1260 and 1355, frustrating and confusing most traders in the process. After an explosive eight-day rally that erased most of May and June's losses, sellers quickly regained control of the market and defended the top end of the summer's trading range. The action lately has been very puzzling, as the bounce off the 200-day moving average that seemed "too cute" actually worked, followed by multiple strong rallies last week that ended at the high of the day, and now an apparent reemergence by the bears. As a further indication of the market's recent mercurial nature, the 50-day moving average on the SPX is now trending lower, while the shorter-term moving averages like the 10 and 20-day continue higher. In choppy markets such as this one, I prefer to mostly sit in cash, as breakouts are more prone to failure and the bulls tend to have difficulty getting any traction. However, if the market can stabilize here and find some solid footing, here are some names I'll be watching on the long side:

ALB has traded within a tight Darvas box between 64 and 71 since May, and volume has dried up nicely in the base. I'd look for a high-volume break of the top of the range to get long.

AZO continues to hover near all-time highs, and has found repeated resistance at 299.50. A break of the psychologically-important 300 level would get me long.

CSII appears to be forming a cup-with-handle base, with the buy point above 15.72. Volume dried up along the low of the base, which is constructive. The 50-day moving average has also provided strong support since initially breaking out in mid-May.

DLLR finds itself in a hot sector, as many credit services stocks like FCFS and EZPW have seen tremendous runs despite the market's weakness. DLLR looks to be forming a flat base, with support around 20 and resistance slightly above 23. A break of 23.50 would lead to new all-time highs.

IPSU is consolidating nicely after a high-volume move up to 22. The strong volume within the base indicates the stock is being accumulated, and I'd look for a break of 22.40 for confirmation of a second leg higher.

PRGO is currently forming a cup-with-handle pattern, as the recent move up to 92 has been followed by a few days of light volume retracement. The 10-day moving average provided support today, and the 20 and 50-day lie nearby to provide a cushion should prices dip further. A move above last Wednesday's high of 92 would constitute a buy point.

VRX has been coiling since early April, demonstrating its immunity to the market's weakness. Volume has been notably low within the base, and the price action has been fairly tight, both of which indicate institutional support. A high-volume move above 55 would get my interest.