Daily Profit Compass February 7

Tickers discussed: SPY QQQ IWM GIS K, TSN, SHAK

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:  

Amateurs and Pros Think differently

 

 

Amateur ( Perpetual Loser )                                                             

  • Sloppy Preparation
  • Mental & Emotional Roller- coaster  tied to outcomes
  • Sell Winners Quickly (  Fear of Market Reversing )
  • Hold Losers ( Hope market reverses to prove them right )
  • How much can I make ?
  • Links outcomes to self worth and dwells on those failures
  • Exhibits mental rigidity in the face of new information
  • Friends with a wide swath of social media “traders” but in actuality is alone

PRO ( Consistent Winner )

  • Meticulous Preparation
  • Stable Mind tied to a process
  • Sell Losers Quickly ( Fear of more losses )
  • Hold Winners ( Hope the trend continues )
  • How much can I lose?
  • A trade is always just a trade; Quickly forgets failure and then re-focuses on the next trade
  • Exhibits mental flexibility and can quickly flip from bearish to bullish with new information
  • Builds a tightly knit support team of “real people” that potentially include: trusted colleagues, a mentor, spiritual advisor and significant other.

Which column of attributes best describes where you are now?   The good news is that if you are not where you want to be, you have the power to change. Yes it’s hard work. What did you expect?

Earnings Calendar

Headlines

  • Corona rolls on. Case count and deaths double from a week ago as the virus follows an exponential growth curve.
  • Toyota, Honda and others push back China output re-start a week.
  • China delays January Trade data; will combine with February  ( never good when you are scared to publish data )
  • Jobs Friday

Jobs Friday

Continued strength is expected in the jobs report today. Regardless of “the number” , focus your attention on price reaction in relation to support / resistance and the key ema’s.

The last 2 Friday’s have produced giant red candles. The past does not predict the future but something to be ready for. If the algos and everybody else decide they do not want “weekend Corona Risk” anything could happen.

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

The doji just below TL resistance is a cautionary position. I sent a note the other day advising to book some gains from the run up. I still think that is prudent. We are extended from the 8 ema so even a simple re-connect brings us back to $329. Friday’s have produced the last 2 big red candles. Be ready if everybody decides they dont want to be long over the weekend and potential Corona news.  Just throwing ideas out there as food for thought. Nothing bad can happen above $332.   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 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 and the top rail of the rising channel has stopped price for 2 days. A break and hold of $230 is a good place to relocate longs and stops. Moves back below / rejections leave a door open to revisit channel lows again.  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

Tons of “air” below $166.50 all the way to $160 as gaps dominate. Bulls need to be leery of moves below $166.50. Price sat on that ledge all day and it held. A move below favors a fast move lower.  A  move to backtest support at $160 would  be a common technical move. $166.50 is your bull / bear toggle point.

$IWM 60 min

Bulls –  $168 was rejected. $166.50 is buyable w/ a short leash. If $166.50 does not hold GTFO!

Bears – Lean in on a break of $166.50 w/ a stop just above. Given the amount of air below this level if you were looking for a place to “size up” this would be the place to do it. No messing around though. Right or right out. A move back above $166.50 you gotta take it off and reset. With luck you’ll see some repair work on the lower gaps.

Trade Set ups and Ideas

 $GIS

Alarm the 200ema and get short with a break below for a $3 move with potential for more

 

$K  Doomsday post earnings reaction dropped price to the 200ema. A break below the 200ema sends it to $60 with a open gap to fill to $57.50

$TSN  Price on the wrong side of the 200ema. Lots of ways to play this but for the most bang for the buck, alarm $74 and get short on a break below. Then look for $62 as price enters a massive thin zone with little technical support.

$SHAK  I am looking for a gap fill higher. Price backed off of $75 but still looks constructive. Those not involved can get long with a break and hold of $75.  $82.5 is the target

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