Daily Profit Compass February 10

Tickers discussed: SPY QQQ IWM SMH, MSI, MANH, GDOT

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.

Trader’s Couch:  Will Return

 

 

Earnings Calendar

Headlines

  • Corona count said to be 40K cases and 900+ dead but accuracy now said to be doubtful as Chin’s health system and lack of test kits swamps system.
  • Some experts believe case count to peak in late Feb at 500K cases.  As China’s factories set to re-open many wonder if this will spawn new outbreaks and spike case load as population intermingles.
  • Chinese dependent supply chains under pressure
  • US Futures flat as Euro and Asian Markets are down 0.40 – 0.50% .  Oil struggles to hold $50. Gold up slightly

Now what?

US markets have largely dismissed the Corona Virus as just another brick in the wall of worry. A tidal wave of liquidity from Chinese, US, and other central banks certainly seem to be helping. Although I do not track earnings closely, things seem to be ok. Good results seem to be rewarded for the most part and misses punished for the most part.  FAAMG names ( basically the market) are holding up so far although AAPL is down $3 in the premarket as China supply chain disruption poses a bigger threat to them than the other FAAMG names.   For me, the FAAMG names remain the key.   THe Market will follow the QQQ’s. The Q’s follow FAAMG.  If the FAAMG names power higher, they should drag everything with it. If they roll over, the market follows.  Exceptions are China-facing companies and commodity centric names. At the very least, Corona is blowing a hole in demand.  Companies are invoking force majeure on commodity deliveries / contracts, bottle necks in ports, lack of flights for air cargo, extended shut down of China factories of US multi-nationals, etc will all have longer lasting effects than to those with less China facing assets.    Gaming / resources / travel and tourism / China -dependent supply chains / potentially semiconductor demand / oil etc

Index Chart Review

SPY Daily

Multiple doji candles at the highs mark indecision if nothing else as markets largely dismiss corona scare but lacking catalysts to move higher ( unless massive liquidity is regarded as a catalyst ).  With price well above the bullishly configured 8 and 20 ema’s, hard to get too bearish.  From here, moves to new highs are obviously bullish while moves to back fill open gaps below are places where nimble, active traders can pick off gains with tactical bearish plays.

SPY 60 min

Bulls –  Stay long against $332. If you’re not long and we get a pull back to the 8ema at $329 – 328.63 area, that would be a good place to initiate a new long w/ a tight stop. A move below $328 means you’re wrong as price will likely fill gap to $324.

Bears – Backfills of gaps are one of the few places to look for objective shorts. Be tactical and nimble. Once the gap is filled, take profits.

QQQ Daily

$230.30 has been a 3-day wall for the Q’s.  A break over the top to new ATH’s would offer a chance to move up stops and shoot against $230 to the long side.  Breaks below $227 and the opens up more downside and potentially repair work on the open gaps below.   We are $6 above the 8ema.  Dont discount the possibility of a reconnect. Nothing truly bad can happen with price inside the rising channel. Time frame is everything.

QQQ 60min chart

Bulls – Unless price pops $230 bulls will be looking at give backs at least to the bottom of the box. Depending on timeframe, a break below $227 starts snow ball to $225 and possibly lower. Short term bulls need to exit below $227 and re-group.

Bears – If you did not short $230, a break of $227 is a good entry point / place to add.  Target is $225 and then $222.50.

 

IWM Daily Chart

IWM chart looks nothing like SPY / QQQ. Here a firm rejection of $168 with 2 decent sized red bars have move lower to fill the first gap. Another large $2 gap sits at $164.16.  Time will tell if IWM is simply doing its own thing or is leading to the downside. On the IWM daily, watch for a potential PPO bear cross and RSI move below 50. THis would set up a sell signal on the daily time frame. A back test of support back down around $160 would be a common technical move and should not surprise anyone if price decided to do that.

$IWM 60 min

Bulls –  You can try longs at either  the top or bottom of the gaps which act as support. Keep a tight stop though. Close up shop if price takes out your stop.

Bears – Bears really want to see a move below $165 and into the next open gap below. A break of $165 and / or a break of 164.14 open more running room to downside with a first target of 162.32.

 

Trade Set ups and Ideas

 $SMH 60m

The gap up last week foiled the short trade on SMH. Still tons of downside repair work to do with gaps stacked upon gaps dominate the technical structure. Moves below the 60m pivot at $143 and then entry into the first gap below may get the ball rolling. I am keeping a close eye on it.

 

$GDOT  Big $10 gap sitting above the 200ema. I’d alarm that level. On a break above you can go long against the 200ema. As objective a long entry you could ever want with the 200ema perfectly aligned with the gap entry.  

$MANH   A little early to tell which way this will go but I know this; $74 will be the spot.  Great long entry if it holds; great short entry if it doesnt. Alarm $74.  Big measured move on a downside break but just as much on the upside if it holds.

$MSI  Price at a critical spot. Watch carefully here. A break and hold above would be a nice place to get long, but the giant toppling tail Friday is cautionary. Wait for a daily close above $181ish before getting long. Don’t fall for a headfake.  That big topping tail may portend a larger rejection there. Have to wait n see.

 

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