Daily Profit Compass July 24

Tickers discussed: SPY QQQ IWM  XLK  NFLX 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

Risk and Trading with Indifference

Quote from Market Wizard, Larry Hite

If you keep all your bets the same and don’t play “favorites” with your trades, you’ll begin to trade with indifference. One trade isn’t anymore important than any other one. When that happens, you trade the market instead of your account balance. Once you focus on the market, your trades will become crisp and clean without the overlay of “favorite stocks” and “over-sized positions”.

Earnings

Marquis names  VZ, AXP, NEE, SLB and HON headline today’s earnings.  Earnings onslaught underway.  

News Flow

  • China orders US to close Chengdu consulate
  • McConnell scrambles to put together a Phase 4 Covid package. Time is short.
  • Chinese shares fall as rifts with DC begin to bite
  • $GS settles 1MDB scandal for $3.9B
  • INTC takes a severe beating after earnings as outlook dims; AMD / NVDA poised to benefit.  $SMH on watch

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

 

Market U-Turn ??

Just like when a stock reaches the front page of Barron’s, my Green Light headline proved to be a curse. There was an exodus from big cap tech as yet another rotation seems to be emerging. As bad as yesterday may have seemed, there was not a ton of technical damage done to the charts. Most of the market leading FAAMG names stopped where they had to with the exception of AAPL which put in a clear sell signal. Its easy to hypothesize so I will. One of two things are going to happen. Big cap will hesitate waiting for the balance of FAAMG to report next  week OR traders / investors will get out while the getting is good ahead of earnings where good results ( MSFT / TSLA ) were met with selling. As we’ve been saying for a while, there have been yellow flags all over the place, but no sell signal and that trying to short tops has been a losing trade.  We have identified the key levels. We will know, rather than guess, when the market turns in favor of the bears. Until now, bears have not proven thay have lasting power. Benefit of the doubt remains with the bulls.

Potential Short Term Strategy

With only a week before these names report, and if more selling begins to emerge, I’d be willing to buy some weekly put options for expiration on Jul 31 next Friday on a couple names if they break support and if it seems there will be a mass exodus. THink about it. If you have embedded gains and you see selling, will you blindly hold into earnings?  Also, if you are not in, would you be willing to step in with a position just a few days before the earnings come out??  I wouldn’t. So taken together there may be motivated sellers, but few motivated buyers. THat mean lower.   Additionally, I think you will see implied vol of options hold in there before earnings. Just make sure you are out before the earnings reports.  Nothing to go bananas on, but I like the idea of taking a couple of shots if the set up is there.  Final thought. Buying some weekly puts or put spreads on QQQ will accomplish mostly the same thing but without the single stock risk

Strategy & Tactics – Neutral to bullish

Benefit of doubt remains with Bulls. 

  • Respect the recent selling.
    • One red day doesnt make a trend but in the environment of extended valuations and rapid sector rotations we need to sit taller in the trading chair.
    • 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. 
    • $AAPL triggered a solid sell signal yesterday. Other FAAMG names are close. THey along can bring down the indexes and market as a whole
    • We could crater into earnings next week or do a moonshot if the fiscal stimulus gets pushed through
    • 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.
  • 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  Friday Jul 24.

Click on the Links to view my annotated live charts

FB                  Daily

AAPL            Daily

AMZN          Daily

MSFT           Daily 

GOOGL       Daily 

Charts in Focus

$NFLX – Bracket break sell signal

We bracketed the gap down on earnings. Yesterday we got a bracket break sell signal as price moved lower.  Now stay short against 485.  A 50ema test at 464.50. A break below that level favors a move to key support at $410. We waited 4 days for the break. That’s how these bracket set ups are supposed to work. Force price to get you long or short.

$XLK  60 min – Triggers a short term sell signal

Active Trade set ups / Positions

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

$SPY – i have a $323 / $319 put spread expiring today.

$SMH – Triggered a short term sell signal on the 60min chart. I entered the SMH jul 31 106.50 puts

$JMIA –  Our entry was $8.50 and in hind sight should have taken some off at $10.50. Didnt see the secondary coming. Still have some time on my options but any drop below $8.50, i am out 

$GWPH – Stopped on a break below $130; small loss. 

$NEE – Earnings today

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

$GDX –  Moving higher with gold but still dont like the price action. Trading too much like a plain old stock.  Will do some careful chart study and update you soon.  I am out but if you are long, no signs of big trouble yet. of $1911. The $USD continuing to fall along with real yields falling is rocket fuel for gold.  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 break to the downside. Stay short against 485

$CHGG – Bought the breakout at 78, but was stopped on the intra-day reversal at 77. Small loss. 

$CHEF – $12 alarmed for a downside break

$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 – after a 10% pop, price coming back in. Alarm 97.50 for a potential dip buy and $109 for a breakout. Premier discount retailer worth watching / trading and should benefit from covid challenged retail landscape

$BBY – i closed long win; now Bracket 99.50 and 95.30.  Price inside the box.  $5 gap below to fill. Alarm your levels

$SYNA – We are out on 9% pop. 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 – Set up a bracket trade after today’s trading for a second day play

Index Chart Review

SPY 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30min

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