Daily Profit Compass July 22

Tickers discussed: SPY QQQ IWM  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

One of my favorite market quotes. There are lots of motivations for market participants. Some love the “action”; some view it as an engaging hobby; some use it as a social club with lots of online “friends” to fill in around their real lives; Some people enjoy losing because then they can be a part of the lonely losers club; and yes, there are some people that view the market and trading as a profession and a place to make good money.  Quick story. When i had my plant nursery, my brother in law, who was wildly successful was also unconventional. One day I asked him why he did not attend trade shows and industry events. He told me in a matter of fact tone, Chris…I am in this business to make money, not to make friends or participate in social events. Everything he did was focused on his prime goal; making money. I remember that conversation 30 years later like it was yesterday.  That guy has made more money than god; well over $15M.    Decide what you want from the markets. Examine motivations. Look deep into the mirror if you’re not getting what you think you want. 

Earnings

Marquis names  MSFT, TSLA, INTC headline a busy week of earnings releases as the season swings into full gear. 

News Flow

  • Futures red as fresh China tensions flare as the US closes Chinese consulate in Houston; retaliation expected.
  • HK sets daily record for Covid cases as virus intensifies
  • Tear Gas gun for home use selling like hotcakes as mainstream moves toward doomsday prepper crowd with violence on the uptick
  • The latest FAA timeline doesn’t have $BA’s 737 MAX in the air until 2021
  • The UK gives up on Brexit deadline and on US trade agreement talks
  • Gold Trading above $1850 as $USD falls further and the $EUR takes out 1.15

Covid Benefit Fiscal Cliff 

Previously posted but I want to leave up for a couple weeks for new subscribers and as a monitor of deadlines as they approach.

BASE CASE :  Politicians will find a way to get a Phase 4 Covid relief Bill signed before the August recess in the ballpark of $1.5T because it is in the best interest of both parties to do so.

BEST CASE:  $3T bazooka

WORST CASE: No deal which would likely send the economy and the markets into a tail spin heading into the election.

Expect politicians to play hardball in the media. This may roil markets. Inclined to buy the dip unless big red lines are crossed on the charts. A deal, any deal, will be market positive.

Covid Relief Runoff timeline

 

China tensions re-emerge ( again )

So the always simmering pot of US – China relations moves from the back burner to the front burner as the US closes the consulate in Houston and as Chinese officials are claimed to be burning documents in a dumpster. Its almost a given that China will be out with some harsh words this morning and close some US consulate…maybe in Hong Kong. Futures are red but off the knee -jerk lows in early pre-market trading.   Focus on these 3 levels.   SPY $323: If price cant hold $323 then it looks like a failed breakout and lower prices expected.    QQQ $262:  This is the upper boundary of prior value range. A break back below gives the recent price action a failed breakout look and is bearish.   IWM  $147.50 below is a $1.50 gap to fill. also $145.   There is a $3 gap to fill below to $142. 

Despite wobbles, fits and starts, the bulls are in control. Maintain a bullish bias in your trades but dont be afraid to take a bearish position or two if the set up is there. THis is a choppy market with lots of churn under the hood. No reason to think that a couple of well-timed shorts couldnt work if the set up is there.  Bottom Line, if FAAMG holds up market isnt going anywhere. If they break down nothing much can save the market. The market cap is simply too large.

Final Note:  $MSFT and $TSLA both report after the bell.  Dont get caught at the deep end of the pool with an over-sized QQQ position that goes against you. I have no idea what the reaction might be. Both could beat and price might tank.  You have no edge. Position accordingly.  I  will not be holding a QQQ position into the print.

 Strategy and Tactics 

Benefit of doubt remains with Bulls. 

  • Lots of warning flags but no sell signals keep me cautiously optimistic and wanting to participate on the upside.  THe lines in the sand are clear.
  • On your positions set reasonable stops and honor them. That is all any trader can do.
  • Watch the FAAMGs.  They alone have the market cap to lift the market by themselves and if they run into earnings we could be set for a blow off top
    • Remember Soros the “bubble hunter”…..”When I see a bubble I buy it”
    • QQQ – looking for the prior high now at $270.  $265 should be support.
    • If you are a short term QQQ trader, make plans to be out ahead of MSFT earnings print Wednesday AH. 
      • Why risk being a bagholder if MSFT and TSLA both whiff?
  • Bears have had so many chances and have done nothing. Make bears prove they can take, then maintain, control.
  • Staying bullish does not mean complacent
    • Stay vigilant! 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.
    • You know they can pull the rug at any time for no reason at all.
  • SPY broke above the wall at $323……Massive OH gap to fill on SPY to 329.
  • 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  Tuesday July 21

Click on the Links to view my annotated live charts

FB                  Daily

AAPL            Daily

AMZN          Daily

MSFT           Daily 

GOOGL       Daily 

Charts in Focus

Active Trade set ups / Positions

$GWPH – Price attacking $140. If it clears, move stop up to $137.50

$NEE – We are out. Look for re-entry after earnings on Friday.

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

$JMIA – Entered long yesterday at 8.50 on the breakout. Looking for $11 as T1

$YETI – Bought the Aug 45 Calls, looking for a pre-earnings run. Closing position ahead of earnings on Aug 6 no matter what.

$PZZA – We are $10 to the good on out $85 entry and just shy of the technical target at $95. Roll higher and protect / raise stops.  Earnings date not posted yet.

$FDX – long against either 155 or 162. Holding its breakout. Room to move higher. Respect stops depending on entry.

$GDX –  The $USD is falling and gold is surging. Buy the dips or stay long.

  • Traders can also look at Gold and Silver miners for individual names.  PAAS, WPM, KL, NEM, GOLD etc

$NFLX – Bracket trade with price still inside. No trigger no trade.  Traders who are active inside the wide range are having a ball. Big intra day moves for nimble active traders

$CHGG – Still like it long above $77 breaking to new highs.

$CHEF – $12 alarmed for a downside break

$ICE – new name. Emerging above $94 that has been a problem for a while. Could have room to run.

$OLLI – Emerging from a bull flag at high levels. Keep an eye on it.

$BBY – Triggered long entry yesterday on break of $90. Got a $5 Pop AH on retail sales update where online sales surged and blew away estimates.  Looking for $100

$SYNA – Popped 9% on news. If you are long I would be taking profits.  Earnings Aug 5

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

$WKHS – Set an alarm at $13 support.

$IBM  They faded the earnings pop. Great trade if you followed price and traded it.

$XRT – Retail ETF is breaking out. Hold your nose and buy it. like it long against $45.50

Index Chart Review

SPY 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30min

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