Daily Profit Compass May 21

Tickers discussed: SPY QQQ IWM CHEF   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 – Will Return

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 soggy as US – China tensions weigh; The latest: Senate Bill requires US-listed Chinese companies must comply with US audits or face de-listing
  • AMZN enters big-budget gaming with release of “Crucible”
  • AstraZeneca gets $1B from US to make Oxford vaccine
  • $ACB enters US market via acquisition
  • Intel buys Rivet Networks and their Killer-branded network cards
  • Brazil virus toll worsens; Bolsonaro pushed

Sector Summary

Energy continues to be a standout; financials firming

Oscillator Watch

$NYMO at 33 and $NAMO  at 35. Both oscillators in the middle of their range.

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.

Companies Gorge on Debt

Wave 2 DATA

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

China Tensions Mount

US- China relations continue to simmer. Yesterday a Senate Bill pass that requires US-traded Chinese securities face tighter accounting scrutiny or face de-listing.  Nothing draconian mind you, simply asking Chinese companies to get more inline with US company regulations. Still it is perceived as tightening the screws. In the meantime the Huawei drama rolls on as does the rhetoric focused on China’s virus response. This backdrop will likely continue to percolate in the background as election season moves closer. Chinese ADR’s will likely see elevated vol as they come in and out of view of regulators and politicians.

Strategy and Tactics 

  • The indexes have backed off from yesterdays close. Not a lot, but close enough to the lower gaps to be a bit concerning.
  • We’ve had a good run lately but right now I think it’s time to manage what we’ve got versus piling on.
  • Let’s see how today goes. If we elevate and move away from those big gaps below we can decide if more long exposure seems prudent. Otherwise we may be looking at a situation of reducing exposure if price makes a down move into these big gaps. For perspective, the gap below on SPY is $9.50. That’s a helluva gap.. The gap below IWM is $7 +.  We’ve seen the market turn on a dime. Let’s sit tight and see how price behaves today.
  • 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 –  Huge win if you got long against $215 on the breakout. Manage risk for here on out. Prior ATH was $222.50 on weekly closing basis. Nice location for reference
  • $AAPL – Needs $320 for higher. Price trading 319. If you are out wait for either a breakout over $320 or a pull back to 302.5 / 300.
  • $AMZN – Price cleared $2450 and is trading $2500; target $2625. Yesterday at the open was the perfect location to get long.
  • $MSFT – Consolidating just below resistance. A pop to $187 opens the door to higher prices.
  • $GOOGL – Price at the doorstep of a breakout. A move above $1412-$1415 triggers a long entry w/ a stop below. A $40 wide gap starts at $1440.

Charts in Focus

$CHEF

Price is making a nice ascending triangle pressing against the declining 50ema at $15.36.  If price can pop $15.50 it will have good technical support below and a huge amount of potential upside as price moves into a massive price void.  I would not expect an explosive move although its possible. I’d expect more of a steady grind toward an eventual test of the 200ema.  I’d advise buying some extra time one the set up triggers and let it grind away in the background.

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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