Daily Profit Compass Jul 28

Tickers discussed: SPY QQQ IWM  $GLD $SLV $DJUSCA  Active trades and set up review  FAAMG Update   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.

Trader’s Couch

Live life more abundantly – Now!

 

Many traders live in a space that can best be described as “I can’t wait until I get this market figured out; then I will be successful, wealthy and can truly enjoy life.”  Number one, you’ll never figure out the market. The best you can hope for is that you work hard enough on yourself to the point where you can faithfully execute a simple process that has a positive expectation on your trades.  Given that for most people this takes years to accomplish, it would be foolish to put off living life abundantly while you wait patiently for yourself to become a “success”.  As Audre Lorde reminds us, “Each hour can’t be banked; they are your life”  This is why it’s vital for you to find your passion, be it in the markets or elsewhere. Each successive hour is your life; spend it doing something you love. 

Companion Video

20 minute video covering the indexes, our existing trades, and bracket trades we are tracking

Earnings

Massive week for earnings headlined by FB / AAPL / AMZN / GOOGL at the back end of the week.  Other noteables: SHOP / MCD / TDOC / UPS / XOM / CVX

News Flow

  • McConnell begins the brinkmanship of trying to get the GOP’s $1T Covid relief package passed, but the House Dems hold a lot of cards.
  • China’s Covid cases pop to highest level since Wuhan
  • After a doomsday H2 outlook, Intel makes changes in it’s leadership.
  • Gold / Silver pause
  • MLB cancels games and the NFL cancels the preseason due to Covid. $DKNG takes a hit

View from the Ground 

(courtesy of Cam Hui  and   The Transcript, which monitors the earnings calls)

The tone of the earnings calls had turned negative last week.

The economy was rebounding in May and June, but the recovery seems to have stalled out as infections have rebounded. CEO commentary was particularly negative last week. Business leaders are rapidly losing confidence and do not see a V-shaped recovery materializing. There’s a sense that government stimulus appears to be the only thing propping up the economy and it’s creating distortions in unemployment and financial markets. Still (perhaps because of this stimulus) the hot housing market suggests that consumers may not actually be in such bad shape after all–just spending on different things.

Here is a summary of the macro outlook.

  • The economy was rebounding, but activity is slowing with the surge in infections (Southwest Airlines, Blackstone)
  • Optimism is fading (Marriott International, Delta Air Lines)
  • CEOs are losing confidence in a V shaped recovery (Manpower Group, Neogen, Unilever)
  • The world has been turned upside down (Southwest Airlines)
  • Businesses are breaking (Airbnb, Southwest Airlines)
  • And life is unlikely to return to normal until there is a vaccine (Accenture, American Airlines, Unilever)
  • We’re facing a very, very bumpy ride (Goldman Sachs)
  • But government stimulus is keeping the economy afloat for now (Everbrite, Capital One)
  • It’s also creating distortions (Manpower Group)
  • The biggest distortion of all is probably in financial markets (Goldman Sachs)
  • A new generation of day traders has been born (Interactive Brokers)

Market Ear

Peak FOMO on Gold and Silver?

When every news outlet has a story on precious metals and William Devane  is encouraging you to buy your metals at Rosland Capital every 10 minutes, be afraid, very afraid.  Gold and Silver are getting that parabolic look that is not sustainable. We can absolutely go higher and often the biggest gains are right at the end of these runs, but be smart about it. IMO you should be scaling out as we go up, not piling in. ( Watch my video on How to properly pyramid a position ) I can assure you there are people out there doing it wrong and who will get hurt. If you’re in options, keep rolling higher and higher, even if you have to do it every day.  Keep peeling off the gains while keeping your exposure the same. Look forward to the day when this thing collapses and you can buy it all back at much lower prices.  No doubt, gold is in a bull market and will drive higher in time, but nothing grows to the sky forever without resting.

 

Strategy & Tactics – Neutral to bullish

Benefit of doubt remains with Bulls. 

  • Reversal of the reversal
    • To my surprise, they reversed tech and broke above a key level. What is interesting is that price tagged my technical target on the Q’s in the pre-market and has since fallen back to $259, which was the key level.  Watch closely. A move back below $259 is bearish. Above $259 is bullish.
    • Dont wish and hope; On your positions set reasonable stops and honor them. That is all any trader can do. Roll & Protect on Winners.
  • Watch the FAAMGs. 
    • Nice rebound yesterday. Earnings on Thursday looms.  AAPL / GOOGL / AMZN / FB all report after the bell.
    • Bears still have to prove it. Bears have had so many chances and have done nothing. Make bears prove they can take, then maintain, control.
  • Risk off Assets flashing a bright yellow light. 
    • GOLD / BONDs and / USDJPY currency pair are flashing a problem.  Eyes wide open.  No impact yesterday.
  • Staying bullish does not mean complacent
    • Stay vigilant! Ratchet stops / Strikes higher on your winners and keep exposure at manageable levels.
    • Dont be afraid to go short if you get a price signal; especially if you’re holding a bunch of longs. You’ll like that balance on red days. 
    • Mark clear levels on your holdings for exits; honor those levels on a pull back.
    • You know they can pull the rug at any time for no reason at all.
  • Stay Fluid and flexible in both positions and thinking; Dont lock in on Narratives.
  • Expecting a hi-vol summer with Covid and political headlines whipsawing markets

FAAMG Live Annotated Charts

Annotations updated  Sunday Jul 26.

Click on the Links to view my annotated live charts

FB                  Daily

AAPL            Daily

AMZN          Daily

MSFT           Daily 

GOOGL       Daily 

Charts in Focus

Is the gaming sector entering a doom loop?  The gaming sector industry group just broke a key technical level by violating the neckline of a huge head and shoulders topping structure. The measured move target is 28% lower.  $DKNG is the best of the bunch but off its highs. Many names are testing key support levels. I plan a deep dive on the sector soon and I will share specific names and trade ideas at that time. Stay Tuned!!

Active Trade set ups / Positions

Bold Text signals meaningful technical changes and / or potential change in an active position. 

$XLK –  Stopped out for a small loss on my short try

$AMD – Popped above the bracket high of $70 and fell back below. Earnings tonite after the bell. 

JMIA –  Up 3%. Staying long against 8.50 entry price. If it pops to the mid $10’s i plan to take action on my position. Earnings for Aug 12, so i have one eye on the clock.

$NEE – Watching; earnings has cleared.

$DLTR –  New Name. Alarm $100 for a potential gap fill $12 higher.

$COST: Bull flagging above the breakout level. Looking for higher

$YETI –  Holding above the breakout. Bought the Aug 45 Calls, looking for a pre-earnings run. up 2.5% yesterday and moving higher. Closing position ahead of earnings on Aug 6 no matter what.

$PZZA –  Make sure you get paid on this. Price has stalled and has met our technical target. Roll higher and protect / raise stops / close.  Earnings date not posted yet.

$FDX – Big 3% pop; stay long.

$GDX –  PM complex near peak FOMO and parabolic charts are due for a pause. Keep rolling and protecting your positions.

$NFLX – Bracket trade busted as price returned to inside the bracket. 

$CHEF – Testing key support at $12 but with earnings days away, letting that pass before stepping in. $12 alarmed for a downside break

$CCL – Broke key support. Opened a tiny position in Aug 7 $14 Put

$DDS –  new name off the radar flyer.  Like it long against 22.50; but short against $22.50 on a break below.  Decide how you want to play.  No position yet here.

$FIZZ – Name entered weeks ago is near T1.  Roll and protect if long; very defensive name but i’d make sure getting paid is part of your plan.

$ICE – Holding breakout above 94.  Could have room to run.

$OLLI –  Alarm $110 for potential breakout to fresh ATH’s

$BBY – Bracket 99.50 and 95.30.  Price inside the box.  $5 gap below to fill. Alarm your levels

$SYNA – Still in bracket/ Earnings Aug 5  Bracket trade set up . alarm $81 and $77.   Time is short before ER. May have to wait until after earnings to enter

$WMT – continues to consolidate above the breakout level. stay long

$WKHS – Set an alarm at $13 support.

$XRT – Holding the breakout. Long against $45.50

$INTC – Bracket 52.20 and 49.50; follow price outside the bracket. 

Index Chart Review

SPY 30 min

QQQ 30 min

IWM 30min

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