Daily Profit Compass June 3

Tickers discussed: SPY QQQ IWM  MOS 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

On Mentors, Gurus, and Teachers

Aspiring traders are generally a funny lot. In a world where we gladly spend $1500 for a coach to help our kids raise their SAT score 50 points, or help them shoot their free throws a little better, traders would rather lose $1500 on an ill-advised trade than engage someone to join their high-performance team and improve their skill set. Setting that aside, I view mentorship as a generally under the radar, low-volume, high-engagement activity. Personal involvement in the trader’s activities are important for skill development.  When I see relentless email campaigns from corporate entities promoting themselves as mentors, I pause.  Like a lantern on a dark path, you can usually spot a resource without them shouting too much about it. You see their glowing light and you walk toward it. From there everything will work out.

Earnings

$DOCU, WORK, $AVGO MDB PD Thursday

News Flow

  • Social unrest backs off a little last night as most protests lean peaceful.
  • Equity rally rolls on as $USD weakens
  • $TIF dives on deal uncertainty
  • $ZM posts a stellar quarter
  • Lightning rod GOP Iowa Congressman Steve King loses primary
  • $GOOGL sued for secretly collecting massive trove of user data

Sector Summary

Cyclicals sit at the top of the list.

 

Market Graphics 

Equities climb the Mountain

After 3 days of gains, equities look to make it 4 in a row with overnight futures green yet again.  Small cap futures broke out overnight and now IWM is favored to push toward $143.50. Any move back below $141.50 squashes bull ideas at least temporarily.  QQQ pushes toward ATH’s. I favor some caution heading into that level if we make it that far. It’s a logical place for price to back away after a 100% retracement off the lows. That back off could be minimal or great, hard to tell. I’d be managing risk and booking so wins into that level. If we subsequently break above the ATH, you’d be able to get back in with confidence knowing the whole world is below as support. We may see QQQ churn for several weeks waiting for SPY / IWM to catch up a little. A fun fact I saw yesterday. On a valuation basis, AAPL now is 30% more expensive than at the ATH in February. 21.6x P/E in Feb vs almost 27x now. I am not a big valuation guy but other people are so something to think about.

 Strategy and Tactics  

  • IWM – Bias has flipped from bearish to bullish above $141.50.  $143.50 and $145 are upside targets.  Cyclical rotation helping IWM.
  • VIX – I own Jun 30 calls.  Will likely close those this morning as the equity advance continues and VIX has dropped below my stop. .
  • QQQ – approaching the ATH. Manage risk here. I dont think price just waltzes through this level. Favor consolidation or price reaction after the initial tag of the ATH level at $236.93
  • Keep ratcheting up stops if you have nice runners. Have a plan to get paid.
  • SPY $300 and QQQ $229 are the key short term levels to watch. Above and bulls have no immediate worries. Below things get more iffy.
  • For longer term traders, bulls still in control. No immediate worries but further downside will test uptrend lines / channel lows.  Seems like a time to pay a bit more attention.
  • Continue to watch FAAMG. Even if you dont trade them, sheer cap size will move QQQ and markets in general.
  • I still think Tactical shorts ok, but overall bias remains and should continue to be bullish.
  • Stay mentally flexible even though your heart may urge you to go “all in”

FAAMG Update & Trading Guidance

  • FB – No changes; Not much between price at 232.75 and the prior high at $240.  Prices above $221.71 keeps the daily chart bullish
  • AAPL – Price lifting off support and clearing $320. ; Trading $3 off the ATH; $316 and $313 are your key downside support levels. Breaks below $313 favor a move to $302.50ish.
  • AMZN – No changes; Price recaptured $2450 and is consolidating in a tight 60m bull flag. A break above 2475 opens path to 2530.
  • MSFT  – A big final 2 hours of trade lifted price to $185; still needs 186.50 for run at ATH 190ish;
  • GOOGL – At $1442, price is creeping into the $40 OH gap. If you want a shot at this filling the gap, now is the time to do it. Set you stop just below $1440 according to your risk tolerance.

$MOS in Focus

Fertilizer and specialty chemical maker Mosaic finds itself where we’ve seen some recent success on our swing trade ideas. That is price clearing the 50ema ( green ) and moving into a big overhead price void created during the sell off. For the set up, alarm $13 for a breakout. On the trigger, get long.  The MOS Jul 13C is currently available for about 90-95cents mid point. Earnings was in early May so it is not a concern.  The target is the 200ema at $16.50. Set a stop below your entry according to your risk tolerance. THe 50ema should provide solid support.

Index Chart Review

Today I drop the 2 hour chart in favor of a zoom out view to the daily as we approach prior highs, key levels and moving averages on the daily chart.

SPY Daily

SPY 30 min.

QQQ Daily

QQQ 30 min

IWM Daily

IWM 30 min

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