Daily Profit Compass May 22

Tickers discussed: SPY QQQ IWM XES NVDA  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

Knowing when enough is enough

“Know when to turn the bowl over and be satisfied”

Have you ever had a nice winner, but instead of graciously accepting the win the market handed you, you pressed n pressed until the winner became a loser? Of course you have. We all have. Part of becoming a successful and sophisticated trader is making sure you get paid when the market hands you a win. That does not necessarily mean closing out a position. It could mean trimming and trailing a stop on the way up, could mean rolling strikes higher or spreading a position. And yes, sometimes it means simply means saying thank you and closing the position.

Develop that 6th sense within yourself while knocking that greed impulse down a notch or two. You’ll begin to book more wins and that sense of progress will grow.

Earnings

BABA and DE report this morning.

 

News Flow

  • US Jobless Claims push 40 million in 9 weeks
  • Here we go again.  Hong Kong Market tumbles 5% as China seeks to impose Security Law.  This time though, they wont be asking for a vote.
  • China abandons GDP target; “Re-commits” to US Trade Deal.
  • Prime Broker RBC tells $USO to stop buying oil futures.
  • IBM; Layoffs coming; Wont say how many.
  • Positive benefits of cannabis on corona virus juice the sector.  Fake news? probably, but we’re long MJ / GWPH 🙂

Sector Summary

Oscillator Watch

Nothing to see here; oscillators in middle of range

Extreme Call buying persists

They’re still coming for calls

Equal Weight NDX continues to diverge from Cap Weighted Index

Wave 2 DATA

Nothing on the board today

Memorial Day Weekend – The start of Summer

After a wet, cold Spring here in Michigan, the weather is finally beginning to break with some gorgeous sunny days. A perfect time to de-couple from the market to do some yard work and to fire up the grill ( if I can find some meat to grill which hasnt been easy ).  Simply sitting outside on a lawn chair to read a book for a couple of hours seems a worthwhile use of time. Planning to use this weekend as a covid- lockdown release valve.  You know, “sharpen the saw” stuff.

Although well off the overnight lows, futures still look soggy and are trading below last nights close. We are well inside decent sized gaps on SPY and QQQ so we’ll be watching that today. Trying to stay open minded about a rip or a dip or sideways chop ahead of the 3 day weekend.  Hard to see a bunch of people wanting to get all bulled up into the holiday but I been wrong before. I plan to go home light and enjoy the weekend. Aside from your core holdings and gotta have stocks, I encourage you to do the same.

.Strategy and Tactics 

  • The indexes are in a mildly bearish posture as they sit within open gaps. I suspect a choppy day and likely a slow afternoon as traders do their best to stretch a 3 day weekend into one that lasts 3 1/2 days.
  • That said, if they take it low today, the sell off will look a bit more sinister. Bears have a lot of work to do to turn the longer time frame charts bearish, but you gotta start somewhere.
  • We’ve had a great run on our recent long ideas. PANW, TWLO , FB plus a half dozen others have been nice wins. I continue to advise to ratchet up stops, roll strikes higher or even punch out winners to raise cash and tp make sure we all get paid for being right.  I dont think now is the time to press the gas pedal to the floor.
  • Re-evaluate what you’ve got today and manage risk into the long weekend.
  • These gaps WILL fill. Maybe today, maybe next week maybe down the road but they will fill.
  • 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.

FAAMG Update & Trading Guidance

FB has been the stand out this week  with the announcement of their “shops” initiative. THe rest of the names look uninspired.

  • $FB –  Trim n trail after $17, 3 day move. Huge win. It’s all you now. Manage risk from here on out. Prior ATH was $222.50 on weekly closing basis. Nice location for reference
  • $AAPL – Needs $320 for higher. Not liking the chart too much. Bearish divergences present and price having trouble here at the top. Not my favorite.
  • $AMZN – Price dropping back below $2450 and into the prior trading range. Caution warranted if long. Technical target becomes bottom of box at $2275 if price pulls back much further. Watch to see price quickly recapture $2450 and move higher.
  • $MSFT – Price backing away from resistance and the indicators are turning down on the 60min chart. No urgency here. Let’s re-evaluate this week.
  • $GOOGL – Price stopped cold at $1410 for 2 days. A pop and hold above opens door to higher prices, but stock seems heavy.  A $40 wide gap starts at $1440.

Charts in Focus

$XES

The Oil n Gas services ETF has been making inroads as oil prices have repaired itself.  Price finds itself on the verge of entering a $10 gap within a massive $30 price void. Alarm $32 and consider getting long with a stop below. THe nice thing about XES is that its a basket of stocks and has no earnings risk. You can camp out for months if the trend remains in tact. THis stock will most likely grind higher vs explode. If you like the set up and get long, consider buying some extra time and simply tuck it away.  T1= Gap fill to $42; T2 = test of declining 200ema  T3 = prior value range at $65.

$NVDA

Nvidia reported earnings last night. The 60 min chart shown below has an island top formation set up in the works. If price gaps down this morning, it creates the island top with gaps on both sides creating the “island”. These patterns are topping formations. If it happens, its a sign to get short against the gap.

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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