Daily Profit Compass July 27

Tickers discussed: SPY QQQ IWM  DLTR AMD 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

If you do not absolutely love or have true passion for markets and trading, it is in your interest to simply stop. Following your passion is the healthiest thing for your well being.  If money is your only motivation for being involved with markets, chances are you’ll lose more than you make.  I have a childhood friend who worked for 30 years as a market maker at the CBOE for a Chicago-based trading firm. At a certain point he no longer liked what he did. He left the markets and started his own successful real estate firm. I am sure he took a pay cut to make that career change, but his quality of life and sense of well-being took a moonshot. Life is too short to engage in things you don’t truly love to do. Especially things that occupy large chunks of time.

Companion Video

 

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

  • New Covid outbreaks from China to Spain. India is world’s fastest growing hotspot
  • The starting gun fires for talks between Dems and Republicans to hammer out Covid Phase 4 deal
  • Gold spikes to record up $45; $USDJPY drops 0.9%.; TLT pops.   Watch these risk off signals!

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

 

Cross Currents

Again, cross currents are raging in the market. Real yields are crashing…..down to near minus 1% is giving a massive lift to Gold.  The dollar is crashing sending $USDJPY to multi-month lows breaking key support at 105 and down almost 1% which is a massive move. TLT is alaso popping as yields fall.  Taken together is a massive yellow flag for risk assets as these measures collectively say economic slowdown  coming.  THe Phase 4 deal is signalling that benefits to unemployed will be called at 70% of income.  THat is a huge haircut as the $600/ wk covid bonus rolls off. You cant spend what you don’t have. Now, to be fair, the deal isnt done. The Republicans may have to bump up the package to get a Democratic sign off.

Be cautious here.  The risk off – equity divergence is growing. Tons of catalysts this week that have the potential to whipsaw markets. I don’t think this is a time to have a large percentage of your assets at risk. Be looking to buy a dip or fade a rip.

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.
  • Risk off Assets flashing a bright yellow light. 
    • GOLD / BONDs and / USDJPY currency pair are flashing a problem.  Eyes wide open.
  • 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

$DLTR – Big OH gap to fill

Alarm $100 for a potential $12 gap fill

$AMD Second day bracket trade set up.

Big gap up gives a nice bracket trade set up. If you see a fade developing, a short against $70 may prove to be a good trade. Very wide range of $6 is tradeable.

Other potential Bracket trade ideas.  EHTH / NKLA / VXRT / KLAC / QRVO / DOCU / IQ / TSLA / SAM / SWIR / TSM

Active Trade set ups / Positions

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

$XLK – Triggered a short term sell signal on the 60min chart. I entered the XLK jul 31 106.50 puts ( note. there was a typo on Fridays note. i said SMH not XLK )

$JMIA –  Up 6% Friday. 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.

$GWPH – I am out. 

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

$GDX –  Gold up almost 40 in the premarket. Roll and Protect if you are long. stay long ; Traders can also look at other Gold and Silver miners for individual names.  PAAS, WPM, KL, NEM, GOLD etc

$NFLX – Bracket break to the downside. Stay short against 485. 50 ema test. A break below 465 opens up more downside

$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 – 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 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30min

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