Tickers discussed: SPY QQQ IWM XLE Strategy & Tactics
The Daily Profit Compass provides the stock market analysis for the day. Key levels and trading locations for the indexes are provided, along with trading plans and timely commentary to keep you on the right side of the trade.
On 3 separate occasions this week, traders within our group reached out to me this week with a fair bit of frustration and disappointment at how their trading has been going. I could feel the pain in their type-written words. For the benefit of all, here’s what they had to say.
Trader 1:“I’ve lost so much this month; maybe my worst month ever”
Trader 2: “I’ve been taking losses left and right recently. It’s just I expect this GDP and other news and unemployment and earnings to hit the market hard and it does the opposite so I’ve been getting HIT “
Trader 3: I’ve literally lost so much money recently. FOMO has got the best of me for trying to recoup losses.
It sucks when we find ourselves floundering, especially in the face of a market that goes up every day and all our buddies are giving high-fives to each other as they print money. I been there. At that moment you feel alone. Here is a short checklist of ideas you can do to arrest a bout of bad trading.
- Confront the losing streak head on; Understand that Action cures FEAR. Breakdown your losing streak into component parts. Then take action in each of the areas to address the shortfalls. Think back to your last winning streak and try to identify things you were doing then that you got away from and re-introduce those patterns to your trading today. You know how to trade. Re-discover those processes one by one.
- Trade small or not at all: It may well be time to take a break to refresh and regenerate yourself. At a minimum you’ve got to back off on your size and frequency of trading. Remember, preservation of capital is your FIRST Responsibility.
- Trade like a fifth grader: Does a 5th grader concern themselves with the GDP, the FED balance sheet, unemployment rates, national debt, or the corona virus infection / death rate? The answer is no. A 5th grader focuses exclusively on price. Above this line I am buying; below this line I am wrong and I am closing my position. A 5th grader trades very mechanically and according to a tight rule set. Boil your trading down to these simplistic thoughts. I assure you results will improve.
- Simplify your strategies: Many traders get tripped up trying to run multiple strategies. They find themselves, long this, short that, selling premium, buying the VIX, dabbling in bonds, and while we’re at it, let’s fade the $USD. I know that you know that you have a core competency. Go back to first principles and run the strategy that brought you to the dance.
- Unplug and isolate: We are in a market environment where the disconnect between Wall Street and Main Street is the widest in history. That in itself creates internal trading conflicts. Example: “Why am I going long into the biggest recession / depression in 90 years? Shouldn’t I be shorting? “. Subjecting yourself to news flow, especially now, can be deadly. Proactively take steps to “Trade like a Monk”. Imagine you are deep in Tibet with just your charts and your trading platform; totally isolated. You would not know Corona -virus ever existed. Do you think it would be easier to be long in this uptrend? Of course it would.
- Talk it through: Trading is a tough, brutal craft. One minute you’re printing money and it couldn’t be easier, then seemingly in a flash you can’t buy win. That would weigh on anyone. Find a trading buddy to work through it with you. When you’re inside of something bad, it’s often hard to see the obvious. An outside perspective can be very helpful. If you can’t find a trading buddy, simply settle for the next best thing, talk to me. It’s what I do.
Hope these ideas help; if they don’t reach out and we’ll figure it out together.
AAPL / AMZN Thursday AMC plus lots of other notable names this week.
- Market ignores GDP disaster print; continues higher fueled by good news from Gilead and MSFT / FB earnings reactions.
- FOMC Announcement a yawn- fest. The main message is “Whatever it takes”. Powell acknowledges hardship to come.
- Royal Dutch Shell slashes dividend for the first time since WW2
- ECB meeting today as Euro GDP drops 3.8% and as France and Spain post their worst GDP drops EVER
- Trump makes a big bet on 2020 with early re-openings
- Florida to begin phased in re-opening on Monday. Miami-Dade, Broward and Palm Beach counties excluded
- German Covid cases spike.
- Intial jobless claims at 8.30am today
- AAPL / AMZN earnings after the bell caps a big week for FAAMG. ( 22% of total Market Cap and more than the bottom 350 stock in the S&P )
The biggest disconnect between Wall Street and Main Street rolls on as the market advances on FAAMG earnings and positive news from Gilead on it’s Covid therapeutic. Not a whole lot to say about it that hasn’t been said. Bulls are in control but not without cracks or worries. IWM is down $2 with QQQ and SPY green. QQQ is grinding into a narrow wedge where it must decide if it’s going back to the prior highs or it’s going to fail. It’s at a fork in the road. SPY is also close to mega resistance at $300. A pop above and the prior highs at $340 would only be a stone’s throw away.
Our XLE long idea is working and oil is up 15% this morning so we’re poised for another pop. The gap fill on XLE is $41 and that remains the target. Trail your stop. Remember, there’s yesterday’s opening gap that will need to get filled at some point.
Wave 2 DATA
4/30 Jobless claims / Personal Income / Employment Cost index / Chicago PMI
5/1 PMI Mfg Index / ISM MFG index / Construction Spending / Rig Count
If you are neck deep in longs; please be aware. If you mess around long enough with NYMO / NAMO at these levels, you’ll eventually need a face transplant. #JustSayin
Strategy and Tactics – Neutral
Keeping things light with AAPL / AMZN market movers yet to report. As mentioned, we could have a blow off top or generate sell signals tomorrow. No edge heading into the print.
Positioning Update: Closed IWM and QQQ puts for losses on small positions. Long GLD May 160 C. and GLD May 165C ; Rolled GDX May 31C to May 35C ; long DHT Jun $8 calls;
Trade Tracker: Working on a trade tracker where we can follow the trade ideas together. Look for it soon.
Index Chart Review
I know I often say this, but the indexes are at critical spots on their charts. I really mean it this time!! AAPL / AMZN poised to either advance the rally or generate some sell signals. It’s that tight and those 2 names have the market cap to be the tie breaker. Tried to be really clear on the chart annotations. Knowing your key levels, having a plan, and monitoring your overall market exposure will be key.
SPY 2 hr
SPY 30 min.
The annotations says Apr 29. That is a typo, annotations are current and have been updated
QQQ 2 hr
QQQ 30 min
IWM 2 hr
Price is sitting at $133 in the premarket, close to the $132 gap support level. That is a troubling sign. Be hyper aware. Below $132 you need to be out if long. A move to $130 or full gap fill to $129 would be favored on a break below $132.
IWM 30 min
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