Tickers discussed: SPY QQQ IWM $NYMO FAAMG SPOT 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 –
Begin with the end in mind. If you don’t feel like you’re the trader you want to be, to begin the process of reaching that goal, start by pretending and acting like you are. Act like a professional trader and you’ll become a professional trader. Before you’re about to fire off a trade, ask yourself, “Would a professional trader, with a risk manager on one shoulder and a trading floor manager on the other, fire off this trade?” That thought pattern alone will save you so much pain and money I can’t even quantify it for you. Think. Act. Be.
Earnings
Earnings season continues to wind down, but still some notable names report this week. COUP, SFIX, CHWY, PLCE, ADBE, LULU, PVH
News Flow
- Futures soggy; Treasuries pop
- $TSM scores subsidies and picks site in Arizona for a new $12B semi fab
- AAPL plans to migrate to its own chips for the MAC
- $GS turns bearish on oil
- Macy’s jumps on better than expected store performance
- $CHK prepares for bankruptcy
Sector Summary
Energy continues to rock. But here’s the thing. I flipped through dozens of charts yesterday. Lots of names heading into the teeth of resistance. Additionally $WTIC is beginning to break down. It was off yesterday and now down 2% in premarket trading. We discussed this over the weekend. Be careful with your energy longs. Charts below.
$WTIC begins to break down
Price was rejected at the confluence of resistance yesterday with price down 3.5%. Now this morning price is off another 2.5%. A 6% down move in 24 hours isn’t nothing. A simple 20ema test brings price to $33.25 or $5 lower from yesterday’s close. If that plays out, I’d like that would be reflected in energy shares.
$NYMO / $NAMO Oscillators blow out
NYMO is 112 and NAMO is 70. Big yellow flags until these rubber band oscillators back off to below 60.
Slippage
Seeing some weakness this morning in futures as QQQ is off 0.5%, SPY off 1% and IWM off 2%. Yields are falling and gold is up a little. Sets up for a mildly risk off day. Maybe the game plan of taking a little off the table Friday and resisting full retard mode yesterday is working. We in the trading room were marveling at the Robinhood stocks of the day. GNUS, HTZ, CHK. CHK was insane with traders pushing a company that is teetering on Ch 11 up over 200% at one point with the stock being halted about 15x during the day. Options IV was running 500%. Seeing lots of outright gambling. They may learn a lesson today as CHK is said to be close to filing BK paperwork. Shares were off 50% AH. That will hurt the chasers this morning.
Anyways, with the FOMC policy announcement on deck for tomorrow, markets may go into drift mode until 2pm tomorrow. Although we added KHC as a long yesterday, not too motivated to pile in long. Let’s stay low-key, let NYMO / NAMO relax, and let the FOMC clear. Maybe we can pick off some dips to buy later in the week, or get a nice short entry into the monster gaps left behind over the past 2 days. Timing a gap fill back to $311 on SPY would certainly help pay some bills and give us a chance for a better long entry. Gotta see how it plays out. In the meantime, lets tee up both potential dipster buys along with potential short entries. If oil falls apart and energy shares follow, watch how fast the great rotation theme changes.
I like being long with modest exposure and tight stops. Plenty of yellow flags present but FOMO animal spirits are beginning to ignite. I think you can participate in a prudent, risk-managed way.
FUN FACT: VIX was up 3% yesterday w/ equities higher. You don’t often see that and something you should both watch for and pay attention to.
What to watch this week.
- FOMC Meeting and Policy statement Wed 2pm
- Massive bond auction with bonds prices on a ledge of support. Big 10 yr Auction at 1pm today followed by a big day on THursday.
- Ditto Gold with price on a big price ledge. Do we see a safe haven pop?
Strategy and Tactics
- IWM – A move back into the gap at $149.55 would be bearish and worth a short entry. Lots of thin air below.
- VIX – I own Jun 30 calls. Using as a hedge for long book.
- QQQ – All time highs are bullish. Anything above $237 stay long. Below $237 be careful; false break out look
- NYMO is 112. Sure it can go higher, but the rubber band is stretched tight. Downside risk is real even though you probably cant see or feel it.
- Keep ratcheting up stops if you have nice runners. Have a plan to get paid.
- 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 – Price has become a little soggy but no problems; Prices above $221.71 keeps the daily chart bullish. That said, momentum has flatline.
- AAPL – No changes. If price comes in to $325 IMO a good dipster buy at the former ATH with support below. You can be long against the prior ATH at $325. Blue Sky overhead.
- AMZN – No changes; looks good. Bulls can be long against $2450. Measured move points to $2625 after breaking out of a big $175 trading range. Price below $2450 would not be helpful. Want that to stay above. .
- MSFT – Price action looks good but prior ATH at $190 remains as resistance.
- GOOGL – Price entered the gap. Want to see follow thru today. Gap fill = 1480.
Chart in Focus: $SPOT
Spotify rocketed higher a couple of weeks ago on the announcement they signed podcast star Joe Rogan to a content deal. Notice how long-standing resistance was taken out. Since the breakout, price has consolidated into a bullish pennant. The ball park measured move on a pennant breakout is around $230 which is $50 higher from here. A failed breakout would bring price back to $155. I like watching and alarming both sides of the pennant just as we would with a bracket trade. I am alarming $190 and $175 just below the 20ema. This wont go to $230 if the market rolls over but if it remains strong and productive, we should remain open to that kind of move. Could set up for a nice trade regardless of which way price breaks.
Index Chart Review
SPY 2 hour
SPY 30 min.
Entry for the $6 gap below is $317.16. Be sure you alarm it if you plan to try and trade it.
QQQ 2 hour
QQQ 30 min
IWM 2 hour
IWM 30 min
$149.55 is the entry for the big $5 gap below. Make sure you have an alarm set if you plan to trade it.
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