Daily Profit Compass October 11

Tickers discussed:  SPY, QQQ, IWM, TLT, USO, UUP, GLD, SLV,  VIX, EL, TUFN, PLNT, CYBR

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.

Earnings Calendar

Light week of earnings. Big banks get into full swing next week.

Market Observations, Technical Developments, Outlook,  and Strategy

Market Recap:

Price continued higher across all the indexes although  IWM is still lagging behind SPY / QQQ.  As I write this, futures are boldly up 1% across the board so it looks as though we will have another gap up open.
 This is crunch time for the markets both technically and psychologically as price finds itself at key spots on the chart with trade news looming.  A lot of tension has been building with regard to trade.  If the market reacts favorably to the trade news with a big relief rally, it would likely flip the charts from short-term down-trend back to bullish as the string of lower highs and lower lows would be broken.   Then the focus will shift from trade / tariffs to Q4 earnings and the FOMC which is scheduled to meet at the end of October.
If for some reason the market interprets the trade news as “sell the news” event, it could be a psychological back breaker to see price pop n drop after having made nice in roads higher over the past few days. We will have to wait and see.
A conservative approach for those who bought the recent dip or who have big embedded gains in certain positions should consider booking at least partial gains before trade news is announced.  One never knows how price will react on these binary events.  It’s like earnings. Price often reacts in strange and unexpected ways.  Anyhow, i’d like to see you bank some coin before that event.

S&P Leaders

 

 

 

 

 

S&P Laggards

 

 

 

 

 

 

Hong Kong News:   Protesters debating a dial back of the violence and vandalism that has marked the past few weeks of protests.  During this time the protester’s support by more moderate voices is diminishing.  The HK market had it’s best day in 5 weeks

China News:  Waiting on Trade results like we are.

Currency News:  British Pound surges as hopes for a BREXIT deal brighten.

 SAFE HAVENS / Oil / US Dollar

$USD via $UUP

Price finds itself at a binary location on the chart as price tests the bottom side of a long rising channel.  This is a perfect objective, low-risk location to “buy value” or to wait for a break to go short with a tight stop above.  Your line in the sand here could not be more clear.

Bonds.  Prices are falling along a down trend line as yields back up.  THe next downside target is support at $141.  The levels have been working well to the technicals and have offered objective locations for trading opps for those interested.

 

 

$USO  More drama in the middle east this morning as Iran had one of it’s tankers hit by a missile. News reports remain fuzzy but oil has popped 1.5%. With that move, price should make a definitive top-side breakout of the triangle and put price on an upward path.

On the $WTIC chart  I have the following levels as support.  $54.80 / 54.15 / $53.50 / 52.90 / 50.90  ( from the 60m chart )  

$GLD   Waiting on a break above the consolidation flag to get long. THe 50ema is providing support.

 $SLV  Same basic idea as with Gold.  Bulls need to see a break above the DT line to get long. Losing $16.25 as support would be a set back.

$VIX

Price closed below the uptrend line generating a sell signal.  I will wait until the trade announcement is made before closing my calls.

LONG  VIX October 16  $17 Calls

Strategy Update:  Most likely will reduce exposure into the trade announcement.

Trade Announcement

With futures up 1% this morning and after a couple days of nice upside moves, those who’d like to take a conservative approach should consider peeling some embedded profits you may have.  The trade announcement reaction is a dart throw. Those embedded gains could evaporate quickly. You can stay bullish / long by rolling higher or by selling against / spreading your position to harvest gains.  This is a fickle market; i have seen a few winners go south very quickly.  I’d encourage you to book some gains.

ETF Mode for Earnings Season

If you have a sector you are particularly interested in or have an opinion on, seek out a liquid ETF if you want to play during earnings season. Much better than dart throws at specific companies where you will often lose.  Look to trade a basket.  In your search, make sure you understand if the ETF is cap weighted or equal weight.  For instance, $XRT is equal weighted retail, while $XLY is cap weighted and therefore dominated by AMZN and a couple other names being 50% on the index.

Risk off trades :   These trades have gone soggy for the past several days as equities have been rising on Trade optimism.

 $SPY

Swing Traders:    Prices above $295 favor a move to $297.50. Above $297.50 favor run at most recent highs with little OH resistance standing in the way.

SPY 60 min:  Price closed at a critical spot just below the downtrend line. Price is set to open well above in the $296 area.  Above 297.50 and a run at the most recent highs is favored.   Any move back below the downtrend line would be very bearish. The support and resistance levels are pretty clear. Trade in and around these objective trade locations where you can place a tight stop.

 

$QQQ Daily

Swing Traders:    To my eye, $190.50 is the uppermost resistance level to where the bear case holds up. Above $190.50 and there isnt a lot of heavy OH resistance to retard a run at the top.  One scenario that would be bearish would be a flash move to tag $190.50, followed by an impulsive rejection that brought price back down below trend and $188.   Given price is already trading above $190.50 in the premarket, all these discussions may  be a moot point.

QQQ 60 min:

Use the minor uptrend line off the lows as a bull / bear pivot. Price above the line is bullish. A break back below the uptrend line would trigger a sell signal.  Prices above $190.50 favor a move toward new highs.

$IWM  Daily

Swing Traders:   Price remains pinned beneath 2 main trend lines.  A break above both would be very bullish and set the stage for a bigger rally.  I think $150 is a good reference location.  That would be a location where a break above would get me long. Below $147 definitely keeps me bearish.   Between $147 and $150 will likely be choppy.

IWM 60 min

There is a gap to fill to $149 and there is also a new gap below that hasnt been filled yet.  Favor bearish action until main down trend line is broken. A break above the DT line favors a move to $150 and moves above that will likely spark a bigger rally.

**************************  TRADES **********************************

Trade set ups

TUFN – No floor if this breaks low.

CYBR – Working in a consolidation flag.  Alarm both sides of the box for a breakout or a breakdown. Take note of the $14 gap that has yet to be filled. Targets shown for breakdown scenario

 

 

 

$PLNT  Big point of interest on this one for both bulls and bears.  Clinging to support but savable. Alarm both sides for either a bounce or a breakdown

 

 

$EL –  Hanging by a thread. $10 gap below to fill. Alarm just below the current level for a heads up on the move.

 

 

 

 Open Positions

The oil spike and general market conditions will likely mean that I will close the XLE and possibly the XOP positions.

Be careful of  FOMO buying in front of the Trade deal news. No way to know which way market will break.

XOP Dec 20 P  for 1.29

VIX October 16th 17 C

SBUX Oct 89 / 84 Put spread   at $1.50 – closed at $3 or better

XLE Oct 59.5 P at 1.23 banked 163% and rolled to Oct 56P

XBI oct 77p at 2.12 closed for scratch trade

TLT oct 143 C at 2.15 – closed for 6% loss on break of support

These metals trades are toast 🙁

GDX Oct 30 C at $1.47

WPM Oct 30 C at $1.32

PAAS Oct 18C

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Notes:

The charts are and levels are provided as well-informed guidelines. That said, please be aware that exogenous events like surprise tariffs or other events can easily move price through support / resistance zones.

Also, set you stops according to your own risk tolerance. The ones I have provided are to be used only as a guide. The most important aspect of your stop is to honor them. Some trades work, some don’t. Honoring your stop will ensure your loss on a failed trade will be minimal.

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