Daily Profit Compass October 17

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Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  GLD, SLV, USO, ATVI, BSX, BURL, AMZN, GDX, XRT

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

Market Observations, Technical Developments, Outlook,  and Strategy

Market Recap:

Aside from a software meltdown, from an index point of view, it was a quiet inside day as consolidation and digestion continue.  No meaningful changes to the technical picture.  SPY / QQQ have overhead resistance near by as well as sizable gaps below.  After hours NFLX held serve with their earnings report and price is up about $25.  CSX trading a bit higher and URI a bit lower. No dramatic revelations.  In software, WDAY got slaughtered by 11% after a junk analyst day. THat was enough to spark a wide sell off across the sector.  Lots of 4-6% losers.  Definitely a space to watch.
The Waiting Game
With price at resistance on SPY and QQQ and with the monsters of tech not reporting for at least several weeks, I think there is a good chance we chop around near the highs until a catalyst appears.  That catalyst may take the form of earnings, good / bad macro data, trade news, or the FOMC at the end of the month.  No real downside damage can occur unless the big gaps below are filled. As long  as those hold, the bulls should stay content. As long as the overhead resistance holds, the bears can take solace that we’re below the highs.  So we wait for a downside or upside break.

Strategy Update:   I am staying very light on positions.  While there are always intra-day trading ops and swings on non-correlated assets, the market environment remain choppy 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.

S&P Leaders

S & P Laggards

Hong Kong News:  Nothing new

China News:   Just waiting for tweets…….

Currency News:  British Pound rising as BREXIT progress seems to be advancing

 SAFE HAVENS

Bonds.  No changes yesterday. Trying to hold support and the uptrend line from way back when. A break below $137.50 would be an outright short

 

 

$USO  Choppy action.. A move to $11.62 – 11.64 area would be a 38% fib retrace of the big down move. That would be an ideal place to try a short.   From here, a move back below $11.10 would be bearish. .

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 for a breakout.   Key levels on gold futures ( /GC ) are $1492 and $1500.

 $SLV – waiting for a breakout

 

 

$UUP  Price declining into a narrowing bullish declining wedge. Notice the divergent low forming as lower lows in price have higher indicator readings. A long entry is on a break out above the wedge. 

$SPY Daily

Swing Traders.  Traders can remain long against the gap opening. What is needed now is a breakout for longs above $301.  Lots of bears will be wanting to fade $301 so expect a war there. I doubt it will waltz through unless a major news event pops it.

$SPY 60 minute chart

Price working higher within the rising wedge. Although we had a slight undercut of Friday’s high, the move was weak and we are green in the premarket. I would not be very concerned at this point.

Bear Set up:   Objective, low-risk shorting locations are as follows. 1. A rejection near $301.  2. A break below Friday’s high at $298.75   3. A gap entry at  $297.10.  4. A gap entry at $296.25 5. A break of the 60min uptrend line.  Set a stop just above your entry when and if price heads lower.

Bull Set up:  Stay long against $298.75.  A pull back to that level that holds is a place to add to or open a new long.  A breakout above $301 is a place to add or open new longs.  Once price clears a level, that is your new stop. Moves back below to prior trading ranges are bearish.

$QQQ Daily

Yesterday was an inside day and favors either neutral or higher prices.  Holding Friday’s high  at $192.60 seems important to my eye.  Closes below  Friday’s low at $190.80 are bearish and would likely mark the beginning of a short term reversal to fill the lower gap which would fill at $188.68.

To move the needle on the upside, bulls need an impulsive move above a resistance zone at $194 – $194.50

QQQ 60 min

Bear Set up:   Shorting locations.  1. A rejection of new highs near $194. 2. A drop below $192.60  3. A gap entry at $191.65 4. A gap entry at $190.80

Bull Set up:  As long as price holds Friday’s high at $192.60 traders can stay long and look for a breakout above $194..  A break above $194 with a hold would be a place to add or start a new long position. Become cautious on a break below 192.60 and especially concerned with a break below $190.80

$IWM  Daily – No changes to the commentary

To my eye, $150 looks like a good pivot to use.  A break above opens the door to $152 and possibly $154 if a broad market rally is supporting it.  Prices below $150 favors lower prices. From a swing trading perspective the top and bottom of the box have been places to locate nice trades as price ping pongs between levels. Here near $150 its much tougher to set it and forget it with choppy price action.

$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

Oppenheimer’s Top 33 Picks  ( A contribution from Paul in the group )

Each analyst was asked to provide their top pick within their coverage universe. The names presented, in the opinion of the analyst, are the best combination of fundamentals and positioning in their market space. I have not looked at the charts of these picks and are not endorsed by me.  It is simply fresh info from a top Wall Street firm.   Below the list, I ran a 3 week relative rotation study. Because there are so many names in the list, the graph is crowded. The table let’s you know which quadrant each stock is in.

ROKU,SAP,AMRC,GPN,NBIX,ITT,UNH,DPZ,GBT,AME,NBL,CME,SGEN,

TRHC,AYX,SYF,BHVN,CRWD,TNDM,WSC,ADMA,JEF,RUN,SERV,

CTRP, CMCSA,LOW,VCEL,LPSN,CHD,TTWO,MRVL

$GDX Daily Gold Miners:  While the chart is not bullish, price is holding support at $26.25.  This is an objective location for a starter long with a tight stop and shoot for a bounce and breakout.  A break above the DT line would be a place to add.  And lets put it this way, if you get stopped out and price is below $26.25 – $26 area, you’re going to get short and make $4 because price is going to to $25 in a flash to the 200ema and then $22.50 because there is very thin support in between.   A really tight set up that I like.

$AMZN Daily.  Price has recaptured the daily pivot at $1752  and is currently just below the confluence of the declining 50 and 200 ema’s.  A price break above $1787 is a long against the 200ema.  A move back below $1753 is bearish and lower prices would be favored.  Earnings next week

$XRT Daily and Weekly –  Price is threatening to break out on both the daily and weekly charts.  A break and hold above $43 is a long w/ a tight stop just below the trend lines.  THe nice thing about XRT is that it is equal weight retail and you can hold through earnings season

$BURL      Watch price in this $205 area closely. Price is threatening to break out from a $15 consolidation range after gapping up a couple months ago. A breakout here targets $220. A rejection here and the bottom of the box comes back into focus.

$BSX –  Price consolidating after a big sell off.  Alarm $38 for a potential breakdown and completion of move to $35.50.  Personally not interested in a long with price below the 200ema but I am going to alarm the 200ema for a potential long idea if price recovers and moves above it

 

$ATVI – Price signalling a buy with a break above the baby triangle.  Still $6 of the gap left to fill. Target = $62

 

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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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