Tickers discussed: SPY QQQ IWM BABA BIDU 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
Yesterday, after a quick post on Facebook, I read and commented on a couple of posts from other traders. One trader was particularly frustrated, desperately asking when he could expect to see consistent returns. He had seen early success, but then a string of losses. The trader had been trading for all of 6 weeks. We all start somewhere but this trader’s expectations are so far removed from reality it was painful to read.
Yesterday we linked personal / trading development being akin to a trending stock where price advances, consolidates, then makes another advance. The graphic above is another way to look at it. Beginners often do well because they approach the market with a “beginner’s mind”. I wrote a blog post on that phenomenon HERE. Then as the trader “gets serious” about trading, they do worse. Then traders often enter a long phase of consolidation. In terms of TA-analysis, this often looks like a rounded bottom. Slow incremental improvement. Because progress is slow, traders often quit either because they’re disgusted for lack of progress, or they run out of money. Eventually trader’s “get it” and systematize their processes into a cogent trading plan. Then consistent, even rapid gains are seen.
I think simply knowing the typical trader progression is important. It helps set realistic expectations so that when you “hit the wall” you wont be surprised. Hopefully it will generate further resolve to power through it.
Earnings
Netflix earnings after the bell
News Flow
- US futures slump after rough Asian session where Chinese Market drops 5% on big volume marking a 3 day losing streak
- China’s retail sales data missed expectations as China’s re-opening data remains choppy
- Prominent Twitter users hacked by Bitcoin scammers; Stock takes AH hit. Fears of disinformation scams heading into the election season grow.
- Netflix earnings tonight will be important for Tech sentiment
- Retail sales and New Jobless claims this morning
Market Snapshots – Focusing on China
Watch the China names today. Could be some opportunities on the pull back. BABA, BIDU, etc
China Rug Pull
Markets are a little jittery and showing some red after a rocky night of trading in Asia that saw a 5% drop in China marking a 3rd day of losses. First Chinese government officials pump the market then after a parabolic rise, they pump the brakes. The Chinese economic data flow didn’t help. Retail sales dropped while industrial measure showed some improvement. So far this morning, the sour sentiment has bled to our markets a day after our markets popped on vaccine optimism. Cyclicals ( back to normal ) stocks were strong helping IWM outperform while growth ( Work from home ) lagged. QQQ seems to be consolidating recent games with FAAMG names muted. Time will tell if the consolidation includes a pull back. Although the back to normal groups like airlines, cruise ships and travel will likely go marginally higher, I don’t think it will last. If you are trading these names, be nimble and quick. They’ll reverse this. Dont get hung out to dry. Keep your stops tight and take profits when you can.
Market Indexes.
Here are the lines to watch. SPY $312 QQQ $252. These are the recent lows. As it stands, the bears have a lower high working. If price closes below the levels I cited, they will put in a lower low. Lower highs and lower lows mark an emerging downtrend. No need to speculate or guess. Those are hard, objective levels. Until the bears can prove it, the benefit of the doubt remains with the bulls. To date, the dipsters have bought every micro dip. Assume that works until it doesn’t. Remain cautiously bullish until bears prove otherwise.
Strategy and Tactics
Benefit of doubt remains with Bulls.
- Warning flags for bulls are all over the place, but that’s been true for weeks if not months.
- Make bears prove they can take, then maintain, control.
- Ratchet stops / Strikes higher on your winners and keep exposure at manageable levels.
- Mark clear levels on your holdings for exits; honor those levels on a pull back.
- Massive OH gap to fill on SPY to 329.
- QQQ seeing relative weakness, May pause or pull back here. Watch FAAMGS for clues.
- Eye’s wide open though trying to keep open and flexible to new data and inputs.
- Expecting a hi-vol summer with Covid and political headlines whipsawing markets
- I realize its difficult, but don’t lock it on an idea or thesis. Stay open and flexible in your thinking. Let price be our guide. Stay mentally flexible here.
FAAMG Live Annotated Charts
Annotations updated July 14
Click on the Links to view my annotated live charts
FB Daily
AAPL Daily
AMZN Daily
MSFT Daily
GOOGL Daily
Charts in Focus
Two China names. BABA and BADU. Look for objective entries as China pulls back
$BABA
$BIDU
$KR – No drama over at Kroger
As noted in an earlier market note, Staples have been strong and are breaking out. $KR is a nice example of steady performance with its RSI and PPO operating in their bullish regimes for a year without even the March rug pull doing a ton of damage. Currently KR is in a 9% wide consolidation box and threatening a breakout. Alarm $35.50 and take it long for a projected move to $37.50 ish. This isnt ROKU so plan for a steady move vs an explosive one. I’d go 2-3 months out on your options strike. Give it time to work
$KHC – Back at the gap Jack
Another XLP name grinding higher. Kraft Heinz is back at it’s massive gap after a nice consolidation. One way I was thinking about this is just to go out to Jan 2021 with slightly out of the money $35 calls for $2.10 and just let it grind away and not try to get fancy. A very good chance that come January, you’re gonna like the way you look. Of course, set a stop. Just because you may have a long term view doesn’t mean facts on the ground can’t change.
Index Chart Review
SPY 2 hour
SPY 30 min
QQQ 2 hour
QQQ 30 min
IWM 2 hour
IWM 30min
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