Daily Profit Compass May 19

Tickers discussed: SPY QQQ IWM PYPL W FIZZ  MJ CVGW   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 – 

I’d never seen this quote from Lincoln before. I don’t believe there is anything that I can add that Lincoln didn’t already say.

Earnings

On the earnings front, the focus turns to retail as HD / LOW / KSS / TGT / WMT / URBN / AAP / ROST report.  In tech land, BIDU / BABA / PANW / SPLK / ADI / INTU also report.

 

News Flow

  • Trump ramps W.H.O. criticism; discloses use of Hydroxychloroquine
  • Powell speaks on Capitol Hill at 10am
  • Germany & France unite to support $500B EU rescue package
  • NASDAQ set to tighten rules on China-based IPO’s; Meanwhile, Muddy Waters says $GSX is 90% fake and to bet on $0
  • AMZN in talks to buy JCP
  • Buffett sells 84% of $GS stake along with stakes in $TRV and $PSX.
  • It is revealed that the reason $PNC is selling its $BLK stake is to raise it’s Tier 1 capital in anticipation of future economic stress.
  • US Shale output tumbles to 2018 levels; China oil demand said to be back to near-normal levels.
  • MNRA printing fresh billionaires out of early investors

Sector Summary

Lots of green shoots

Oscillator Watch

$NYMO and $NAMO  middle of the range. Not helpful until extremes are reached.

Call Buying spikes; highest since Early February

While I’ve found that my Put / Call Extreme-o-meter seems to work better calling bottoms than tops, it’s noteworthy that call buying is reaching to extremes.  Many times the market will not let extreme call buyers or put buyers win. Give we are at the high end of the price range, this reading may carry more importance.

Wave 2 DATA

5/19 Housing starts / Redbook / Jerome Powell speaks at 10am / Rosengren at 2pm

5/20 Mortgage applications / Oil inventories / FOMC minutes at 2pm

5/21 Jobless claims / Flash PMI numbers / Philly Fed Survey / Existing Home sales / NatGas inventories / Powell speaks at 2.30pm

5/22 Rig Count 1pm

Pause

Market participants launched price higher by 2-3% for QQQ and SPY respectively, and an astonishing 6% for IWM. Given the last 3 day run off the Thursday low, it’s likely time for a pause. Lower time frames are overbought so I’d expect things to quiet while the market re-fuels and decides next moves. I found it interesting and revealing how the market sifted Powell’s 60 Minutes for the market positive items ( unlimited bazooka ammo ) and ignored the market negative comments ( persistent unemployment at a higher level, 2022 for full recovery ).  Tells me the market has at least the intent to go higher. Intent doesn’t mean it will go higher but it’s more constructive than the intent to go lower.  In yesterday’s session participants gravitated to beaten up sectors and cyclicals. ( Airlines , financials , industrials ).  We’ll need to keep our finger on the pulse here. One day doesn’t make a trend or a confirmed sector rotation but we need to be aware. The Q’s lagged yesterday and it’s not often you see that.  Powell talks at 10am today. Can’t imagine new info being shared but there’s always the possibility of a gaff if Powell wanders off script.

Strategy and Tactics 

  • The bounce exceeded the prior high of 2 weeks ago on SPY.  I have OH resistance marked at $300 and $302.50. Tough levels to take out but so far, price has been up to the task.
  • Gaps:  Massive gaps below across the indexes offer big profit potential whenever they decide to fill.  Alarm them and be ready.
  • The price action over the past 3 days negated the bearish set up from last week. Bulls did everything that was asked of them. They held key support and closed above the recent highs.
  • Bears have to prove it now.
  • Keep long exposure at moderate levels and maintain tight stops. If you guess right and get a power move in your favor, make sure you get paid. I don’t view this environment as one where’d you simply camp out for weeks. It wouldn’t take long to find the low side of the recent trading range.

FAAMG Update & Trading Guidance

FAAMG under performed yesterday as traders preferred cyclicals and other beaten down names / sectors.  Q’s will stall or go down if FAAMG stalls.

  • $FB – A move above $215 opens the door to higher prices. Those wanting to get long need to wait for $215 to be in the rear view mirror.
  • $AAPL – If you caught the low, stay long against $302.50 and look for $320.  Price in technical no man’s land. If your not in, wait for $320 to be taken out. Any pull back to $302.50 – $300 zone can be bought with a tight stop.
  • $AMZN – At $2425, Price is at the high end of it’s 6 week trading range between $2275 – $2450.  New longs need to wait for either a breakout  or after a trip back to the low side of the range. Bold bears have an objective shorting location at $2450 if price stalls or gets rejected. That level has contained price for 6 weeks. Resistance is resistance until it isnt.
  • $MSFT – hard place to buy with price just a couple of bucks below the ATH;  At this point it either makes a new high or is rejected.  Be patient if you’re looking to get long. No line to shoot against here.
  • $GOOGL – No touch for fresh longs until $1415 is taken out.

Charts in Focus

$PYPL

Head fake breakout. Be careful if long. Respect your stop. Time frame is everything. The chart is bullish but price may decide it wants to consolidate further before te next advance.  A break below $139.28 turns the chart bearish and would favor a gap fill lower.

$W

Monster win if you alarmed $163 and took the trade. You were rewarded with a fast $10 move lower on a day where SPY was up 3%.  Stay short; trail stop; look for $135 gap fill.

$FIZZ Weekly

National Beverage, owner of LaCroix sparkling water and old school brands Faygo and Shasta, has put in a double bottom on the weekly with bullish divergence on the indicators. A break above $55 triggers the technical pattern and targets $77.50 on a measured move. T1 and T2 are shown where technical resistance lies. Alarm $55 for the long entry. Remember this is a weekly chart. I’d buy 3 months of time for the trade. Let is grind away in the background.  Set a stop just below $55.

$MJ

Cannabis ETF looks good to $15. Set a stop below yesterdays candle at $12.50

$CVGW

On a break above the 50ema at $60.50, its objective to get long with a stop just below. T1 = $66 gap opening.  T2 = $72 full gap fill.

Index Chart Review

SPY 2 hr

SPY 30 min.

QQQ 2 hr 

QQQ 30 min

IWM 2 hr

IWM 30 min

 

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