Daily Profit Compass May 20

Tickers discussed: SPY QQQ IWM WMT MCK MHK   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 – Manage your environment; Go First Class

Author David Schwartz, in his book “The Magic of Thinking Big” suggests that our environment plays a huge role in our success or lack thereof. What is equally important to understand is that we can have a profound effect shaping our environment. Try these positive environment shaping tips.

  1.  Be environment conscious: Most take special care in what we eat to keep the body healthy; Be equally conscious of the environment we keep for our minds
  2. Make your environment work for you; Avoid negative people and naysayers. Their comments will infect your mind like a Corona virus
  3. Seek advice from those who know more than you do.  Seems simple, but many people seek advice from either equals or those that know less than they do
  4. Seek psychological sunshine.  New groups, new people, explore new perspectives. Drop the dead weight from your social circles.
  5. Rid yourself of “thought-poison”;   Thoughtless social media interactions; endless debates about nothing; Block trolls that bug you. Associate with uplifting people
  6. Go First Class:  We all sit up taller when the flight attendant says “You’ve been upgraded to First Class”  In life we can proactively do that for ourselves, we don’t need to wait for someone to tap us on the shoulder. 

You will be quite surprised at how much better you feel and perform when you’ve taken steps to upgrade your environment. Start now. 

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

  • Futures advance; largely negate the MNRA-induced late day rug pull.
  • China’s fresh Covid outbreak suggest virus is changing – Bloomberg
  • Covid runs wild in Brazil as it becomes a global hot spot
  • FaceBook unveils “Stores” feature where users can shop for their favorite items; Stores is powered by $SHOP
  • MNRA Vaccine Data questioned; Secondary Stock offering questioned more

Sector Summary

ThHe late day sell off reversed what was a mostly green day.

Oscillator Watch

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

Extreme Call buying persists

They keep coming after calls in a big way. Time will tell if Mr. Market decides to not let these guys get paid.

Wave 2 DATA

 

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

Magic Eraser

So the market minions went to town last night after the close to go about fixing the mess Moderna started with it’s suspect covid vaccine data and bogus secondary offering.  It’s stuff like this, and Luckin Coffee, that give Wall Street a tarnished name. But, where there is money there will be greed and where there is greed there will be corruption. Good luck changing that dynamic.  Anyways, you’ll see in my chart annotations that if the bulls were to recapture the breakdown candle highs of yesterday afternoon, that they will have largely erased the sell signals generated by the breakdown.  As I glance across the indexes, the Bulls have largely accomplished that.  Of course the overnight repair was done by the pajama traders. It wont count for sure until the A-Team takes the field at 9.30am does the score count. Let’s see if they build on gains or erase them.  Please note that we will have a big gap below on the open this morning. THey may want to go down and back test yesterdays closing low. That would be a nice trade for the nimble.

I will be watching banks and other cyclicals to see if the early signs of a rotation are built upon or if Monday’s action was yet another in a series of head fakes into value that ultimately fail. Watch Walmart today. Terrible terrible price action after earnings. Went from up 4% to down 2% and printed the biggest meanest bearish engulfing candle on that chart in over a year. Moving Walmart 6% isnt easy. That is serious selling. It also came at a relative high and now the chart has a double top look. Worth watching. The chart is below.

Strategy and Tactics 

  • Assuming the overnight recovery sticks, we recycle back to yesterdays trading plans.
  • 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 had a chance to follow through today after yesterday’s sell off. Looks like a fail at this point. Too much bull horsepower.
  • 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 –  Stay long against $215. Below $215, price is subject to a deeper pull back
  • $AAPL – 60m chart is ok but not inspiring. If you are out wait for either a breakout over $320 or a pull back to 302.5 / 300. Price in no9 man’s land
  • $AMZN – Price closed at $2449.33. Above $2450 take it long w/ a tight stop. This is a perfect trade location if you want to be long.  Trading range implies $175 of upside for a measured move.
  • $MSFT – Rejected and pulled back from prior high. Need to see 187.50 taken out for chance at ATH run.  Be patient if you’re looking to get long. No line to shoot against here.
  • $GOOGL – Sleepy. Momentum fading a little and printing a lower high on the 60m chart.  No touch for fresh longs until $1415 is taken out or a pull back to support.

Charts in Focus

$WMT

This bell-weather retail name is worth watching even if you don’t trade it.  That is one ugly candle that will leave a long-standing mark on the chart. Let’s see if it was a one-off bad day at the office or if it develops into something more.

$MCK

New Ticker introduced yesterday. Drug distributor McKesson is poised to make a move here. Rising RSI breaking over 50 coupled with PPO emerging above zero line are supportive of a move higher. If it can pop $145 and hold it, I think it can see low $150’s pretty fast. If the market gods bless it, a move over $152 ish open the door for a run toward the recent highs.

$MHK

If this long set up on Mohawk triggers, you want to be on top of it. If price can take out the 50ema and pop $87.50 it will enter a $20 thin zone where it could find $110 very quickly. Alarm it and be ready.

 

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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