Daily Profit Compass October 14

Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  GLD, SLV, USO, VIX, AMZN, GOOGL, YETI, MCD

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

Bond Market closed for Columbus Day;  No earnings today; Bank earnings get into full swing tomorrow

Market Observations, Technical Developments, Outlook,  and Strategy

Market Recap:

SPY and QQQ were up big on Friday but the close was weak. Hints are coming out now that make the Phase 1 deal was fake.   China now saying they want more time and further talks in late October before signing any deal.  Bloomberg also saying China wants the December tariff tranche suspended as part of any deal.
In terms of price action, futures are toggling between being down  0.40% and 0.50% this morning.  I said this yesterday……
“A scenario that would frustrate the most people would be a gap down Monday morning. This would hang all buyers on Friday out to dry and deny them an easy exit. It would also deny shorts of a “simple entry” just pennies below Friday’s close. The gap down would put price in the middle of the $3 gap leaving a gap both above and below price thus leaving all traders guessing if price would back track to fill the upper gap to $296.25 first or head south to fill the lower gap to $293.25.”       Find it HERE 
Whether the above scenario holds for the open is not really important. The key is to watch the price action carefully to monitor the reaction to the updated news.   In fact, if they close this opening gap to near the Friday close, there is much less risk in the trade because our stop will be much closer.

Strategy Update:   The environment remains choppy within a wide range and not very conducive to multi -week swing trades.   Remain nimble and flexible in both your thinking and positioning.  If active, short -term trading is not your thing, wait for solid long-term buy or sell signals to emerge and / or trade small if at all.

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 :   Bonds have been selling off. Gold and Silver have been soggy while both consolidate.

$NYMO and $NAMO Oscillators; “Don’t fight $NYMO”

The oscillators are in a neutral posture. In my experience these indicators are only useful at extremes. The oscillators can go higher or lower from here.

S&P Leaders

S & P Laggards

Hong Kong News:   UK Police officer slashed in a scuffle with protesters but is expected to recover.   CBS 60 Minutes featured HK protest last night on their broadcast.

China News:   Junk import / export data dump last night.

Currency News:  British Pound coming off 2mo highs as pessimism on BREXIT deal creep back in.

 SAFE HAVENS

Bonds.  Bonds continue to sell off. Support and resistance levels shown.

Bond Markets are closed today.

 

 

$USO  Futures are down over 2% on China trade and demand worries re-emerge.   Currently price is in no mans land. Wait for a cleaner shot before initiating a position.

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   

 $SLV

$VIX

Friday’s action collapsed the VIX.  I still have my calls.  Will most likely close them today or possibly roll to a future date.

LONG  VIX October 16  $17 Calls

 $SPY Daily

Price put in a big gravestone doji which is a bearish reversal candle. A red candle on Monday would confirm a near term reversal is underway with a target being a gap fill to $293.  A green candle, depending on how big it is, would chip away at the bear set up.

I wrote a blog post specifically on how to trade the gravestone doji on SPY with specific levels and strategy.  For further detail, please refer to that post HERE

$SPY 60 minute chart

Bear Set up: A break below Friday’s low at $296.25 would be a bearish development and would favor a move to fill the gap to $293.24.  Should this move emerge, get short with a stop just above $296.25.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $296.25 to shoot against on the long side with a target at Fridays high near  $298.75.  A break above Friday’s high would be an objective place to either add or initiate a new long position with $301ish being the target.

 

 

$QQQ Daily

While Friday’s candle isn’t as textbook a gravestone doji as SPY, there was selling pressure into the close and in my opinion the trading methodology for Monday should be the same as it is for SPY.   Simply put, a close below Friday’s low at $190.80 is bearish and would likely mark the beginning of a short term reversal to fill the lower gap which would fill at $188.68.

A close above $190.11 would be bullish and would chip away at a bearish reversal scenario.  A break above downtrend resistance at $192ish would favor a run at new highs.

QQQ 60 min

Bear Set up: A break below Friday’s low at $190.80 would be a bearish development and would favor a move to fill the gap to $188.68.  Should this move emerge, get short with a stop just above $190.80.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $190.80 to shoot against on the long side with a target at Fridays high near  $192. 60. A break above Friday’s high would be an objective place to either add or initiate a new long position with the prior high at $193.81 being the target.

$IWM  Weekly

Aside from the disaster that was December, price has been in a $12 wide trading range for a year. Now price is squarely in the middle of that range.  The width of the range is predictive of the eventual future move.  A break above the range targets $12 higher while a move below the range targets $12 lower.  Longer term traders who dont want to fight in between can mark those levels. Once you get the breakout / breakdown, “go with price” with a stop nearby.

$IWM Daily

On Friday there was a “fake print” on the lower tail of the daily bar. Consequently the chart is messy and not conducive to a clean look so I am going to skip it.  for your own edification, look at a lower time frame chart. You’ll quickly see price did not go lower to fill the gap.

$IWM 60 minute

Bear Set up: A break below Friday’s low at $149.79 would be a bearish development and would favor a move to fill the gap to $147.72.  Should this move emerge, get short with a stop just above $149.79.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $149.79 to shoot against on the long side with a target at Fridays high near  $152. A break above Friday’s high would be an objective place to either add or initiate a new long position. THat said, there is significant OH resistance at $152.50. Conservative traders may want to hold off on adding or starting new longs until $152.50 is taken out.

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

Trade set ups

$GOOGL 60min Chart:  A terrible close on Friday.  $1215 is the bull / bear pivot on this time frame.  A move below $1211 opens up the path to lower prices  with an open gap yet to fill below.

MCD – Price has broken its nice up trend line and is now consolidating the first leg of its down move.  THe set up says lower prices are favored.  Notice RSI and PPO going bearish.  Traders can go short against 212.50 or wait for a box break to establish a position.

$YETI  looks good for a run to resistance where the double bottom measured move is targeting.  Note the bullish divergence on the indicators

 

 

$AMZN –  60 minute chart gives a very clear picture of the price action.  If you dont want to mess around on the short side, alarm $1752 for a breakout to get long. You can see how price has respected resistance for a month or more.  $1752 is the pivot on the daily chart.  A break below the uptrend line on the 60m opens the door for lower prices.

 

 Open Positions

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

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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