Before the Bell June 3

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Tickers discussed: SPY QQQ IWM FB AAPL AMZN GOOGL MSFT NFLX TSLA SMH NVDA YETI BURL

Before the Bell  is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Earnings 

ZM, SPLK, CRWD, DOCU, AVGO, FIVE headline an otherwise slower week of earnings releases.

Trade Ideas

Chart set ups on NVDA, YETI, BURL, and SMH are discussed in the video

Companion Video 

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at 1.25x to reduce run time.

Find the Video  HERE

Upgrades and Downgrades

Not available at time of publication

Reddit’s Revenge

As I pointed out last week, the Reddit Army was re-activated after a period of dormancy in the equity market for a couple months.  Recall what stamped out the retail speculation earlier this year was when Robinhood halted trading to satisfy a $3B margin call from it’s prime counterparties. ( Don’t you hate getting those calls? )  From there I think those speculative assets and traders migrated to the crypto space. That’s when we saw Etherium / Dogecoin  vol explode. What brought retail back to equities was the 50% rug pull across both the crypto space and the green transformation complex.  So these speculative assets are like a swarm of locusts with an insatiable hunger.  They roam from asset class to asset class / instrument to feed upon.  I dont think this is all retail either. I think hedge funds are involved. They have the sophistication and capital to influence these trades. The numbers being generated are staggering.  Yesterday for example, $40B of AMC stock changed hands.  The stock traded 1.5x its entire float….so the whole company changed hands  1 1/2 times.   THe thing is now, with a Robinhood IPO around the corner they are not in a position to pull the plug on trading. If they do, their IPO will be in jeopardy.  So its not clear how this all ends or if it does.  Archegos, and its Prime Brokers,  lost $20B in the last fiasco. Will there be a next shoe to drop?  We’ll have to watch to see how the drama unfolds.

Thoughts on Trading the Meme Names

I’m not one to tell you not to gamble, but a few thoughts if you decide to jump in.

  • Treat all trades like lottery tickets.  Expect to lose it all.  Dont use monies that if lost, will put your trading account or worse at risk.
  • Watch overnight Risk.  One in the hand is better than 2 in the bush.  Don’t underestimate how deep or severe an overnight rug pull can be. Consider taking wins when you can.
  • Market Makers are paid to Win.  These guys are no dummies, They’ve jacked option IV to the moon making options incredibly expensive and thus harder to win. Make sure you know your risk / reward profile before to dive in.  For instance, I priced some $25 strike PUTs in AMC a couple of months out. They were $25. So if AMC went to zero, I would get my money back. Not the kind of trade that makes sense.
  • NEVER SELL NAKED CALLS or PUTS.  While it may be super tempting to sell vol premium at the jacked levels, selling naked options exposes you to UNLIMITED RISK.  If you sell anything, it must be a spread to limit / define your risk.

INDEX CHARTS

A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.

SPY 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min 

IWM 2 hour

$IWM 30 Min 

 

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