Daily Profit Compass February 6

Tickers discussed: SPY QQQ IWM GOOGL HAS FB XLF DIS DISH

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:  

Think for yourself.

 

 

 

 

A big part of becoming an accomplished trader is both learning to think for yourself, then learning to trust yourself.  There is a fine line between using others for idea generation and following others blindly and exclusively. You’ve got to truly own your ideas and your trades. Otherwise you’re simply dangling out in space with nothing to hold onto. You’ll be shaken out on the first red bar on trades you have no commitment to nor mental skin in the game.  If you spend 3 hours looking at your charts instead of cruising stocktwits and youtube looking for the next big idea, I can assure you that you’ll build skills faster. You’ll also build that trust in yourself and your trade ideas. Success and failure will mean so much more.  Re-assess how you’ve been going about idea / trade generation.  Change direction if necessary.

Earnings Calendar

TWTR, UBER ATVI BMY YUM EL TTWO ZEN SKX   today

Headlines

  • Rally roles on; China cuts tariffs by 50% on $75B of US Goods
  • China Commodity users begin to invoke Force Majeure
  • TSLA pulls back
  • Trump Acquitted as the Impeachment Trial ends with a thud

Force Majeure? ; Who Cares!

For those not familiar, a “Force Majeure” clause is common in many contracts, but especially common in commodity contracts. It’s the fine print that says in the event of an “Act of God” the contract is null and void.

This week China’s CNOOC began invoking force majeure on NatGas contracts as a result of the Corona Virus. In fact, China itself is planting the seed of doing the same thing with its Phase 1 Trade Deal purchase commitments with the US.  The Corona case load continues to increase as does the death count which is over 500 now.  So Corona rolls on. It will certainly blow a hole in commodity demand, but as far as the market is concerned, it is currently viewed as a non-event.

Aside from the reasons behind the mini pullback over the past 10 days, from a technical perspective, I really thought a deeper pull back was coming given the overbought levels and other technical signals flashing a risk off move was building.  Wrong.  Last week, on Fed Day, i titled the morning note Liquidity vs Corona Virus.   The policy response of China to Corona has been and will be massive liquidity injections. The Fed rolls on with it’s nightly liquidity injections. So Liquidity is winning.  The market has spoken with 2-3 days of huge gaps up and even all time highs for the Q’s.  So from my chair, price action forced a re-think and a reset. I will be taking selective shots on names during this rebound, setting and honoring stops, and watching price. I still think Corona comes back into view for the market, but that is nothing to trade on. Price is above all the moving averages across all of the indexes, so that’s unmistakably bullish.  If / when price falls below the 8ema and 20ema, we will re-assess. Tracking price in relation to the moving averages gives you an objective way to see what is going on.

If you missed it, here is a copy of the Global Macro Investor January 2020 Newsletter produced by Raoul Pal. This 144 page monster tackles the biggest topics and opportunities in the macro trading space. A fascinating read. Download it here Global Macro Insider Jan 2020

Index Chart Review

SPY Daily

Price moved above the prior high, then camped out for most of the day. I think traders can be safely long above $332. Be aware of the overhead resistance as price bumps its head on the bottom side of the rising channel from below. If price can jump back into the channel it would be bullish and new support would be established.  Mark all of your opening gaps and carry them forward on your charts. It may take a long time for them to be relevant or may  become relevant right away.  Gaps, at some point, get filled / repaired and the gap levels act as support and resistance for price.

SPY 60 min

Bulls –  Stay long against $332. If you’re not long and we get a pull back to $331 that would be a good place to initiate a new long w/ a tight stop. As we’ve seen before, this market is denying nice long entries with price gaps higher every night. All you can do is pick a logical spot and locate a stop near by. Intra-day swoons, if we get them, are one of the few chances to get in at better prices.

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.

If price is rejected at prior ATH’s it is objective to try a short against it and hope for a fill all the way back to $324.  If price breaks above the prior all time high, dont waste your time of money trying to short new highs.

QQQ Daily

With price at all time highs, but did not like hitting the top rail of the rising channel. THe door is open for a revisit of the low side of the channel but it seems like either a jump above the top rail or simply to walk up higher prices just below seems more likely.

QQQ 60min chart

Bulls – Long against the day low $226.85 or $230 if it is cleared are logical spots for longs to key off of. If price breaks below 226.85 the set up gets more iffy short term.

Bears – Be a back fill gap hunter. It is the only objective plays for shorts at this time. Shorting All-time highs wont get you very far.

 

IWM Daily Chart

Mark $166 as first support and $167.60 as first OH resistance. Bulls ok above. Below gets more iffy.  Clearing $168 opens the door for a run back to $170.

$IWM 60 min

Bulls –  Long above $168 w/ stop below. Target $170. A pull back to $166 that holds would be a nice entry.

Bears – Again, be a gap hunter. Get short on a move into the open gap below with a stop just above. Your target is the bottom of the opening gap.

Trade Set ups and Ideas

 $XLF

Got the mini breakout with a move above $31.  Traders can now be long against $31 w/ a stop just below.

$DISH  Breakout above $37 triggered yesterday. First target is $39. Above that is more running room.  Any back test of $37 is buyable. THose that want to be long but missed the breakout could set a stop at $37.25 – 37.50 if you wanted to maintain a tight stop.

$DIS  Nasty post earnings candle where they faded 100% of the ER pop.  If price moves back below $140, it may set up for another move to test the 200ema and possibly even fill the gap below that remains open.  I got a couple of Feb 140 Puts on it with lunch money. If price breaks above the 50ema in green, i’m out.

$HAS  THis is setting up for a nice trade. Big gap above and open air below for a potential return to the prior lows.   Alarm $102 for a potential downside break. Get short if it triggers. Alarm $106.50 got a gap entry and get long for potential gap fill.  The long lasting consolidation and vol compression between $102 and $106 means the first “break from the box” might be explosive. Set your alarms and be ready.Earnings = Feb 11.

$GOOGL 60min

The stock is currently trying to figure out what happened on earnings. Ignore it and fill the gap above or take it lower?  The annotated chart has the levels. Set alarms, then wait.

$FB 60min. Set your alarms as annotated on the chart. Setting up for a good trade regardless of direction.

Post Earnings Gappers

The following tickers will have gap openings today.  Nimble traders may find trading ops here intra day.  Others can let today play out, then set up bracket trades on them as second day trades.

PTON / TWLO / PAYC / CAH / MBUU / IRBT / TPR

 

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