Daily Profit Compass October 23

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Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  UUP,  IHI, SMH, MCD, PAYC

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

Big Guns

Again SPY and QQQ ran into a wall at resistance and were turned away.  This generated 60min sell signals on both charts as price slipped below their respective uptrend channels. IWM outperformed simply by not going down. Price again tested the top of a sizable gap at $153.90 but it held firm.
While it wasnt all that intense, the Q’s saw most of the selling pressure in afternoon trade.  $FB got whacked 4% on anti-trust developments in DC  while the high-growth, zero-profit cloud names again got nailed. The software group as a whole was down 1.77%
In the weird group, both $NKE and $UAA announced their CEO’s were departing within 8 hrs of each other. In the case of Nike, the CEO of $NOW quit to take the $NKE job.
In the broader markets, $MCD had a high-profile miss dragging down the restaurant sector. $SBUX and $DRI are 2 names we’ve featured in recent weeks were both down. $DRI saw one trader hit the NOV 110 Puts 500x which was notable. $SBUX continues lower and reports next week.
After hours, $TXN dropped a bomb with junk Q4 guidance and took a big hit and took $SMH with it.  That will be an important sector to watch. I have been amazed $SMH and how well its done.  The semi’s are a tech bellwether so keep it front and center even if you don’t trade it.
Beginning tonight, the big guns of tech begin to report. MSFT after the bell, and then $AMZN to afternoon.  Please disregard the market action they report. What matters is the reaction the following day when institutions make their moves. As we’ve seen with NFLX and others, the pajama traders can push a stock around AH but then the real move is the following day, often in the opposite direction.  $FB, $AAPL, and $GOOL on deck.

Strategy Update:   I remain light on positions but have been able to pick off some intra day moves.  $MSFT and $AMZN have the ability to gap QQQ in either direction and I am not willing to guess which way this gap will go. Near term direction will be decided in the next week or so.

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 – Stockcharts lost their data feed for this info, will return ASAP

Hong Kong News:   Reports have China hatching a plan to replace current island Governor Carrie Lam in March of next year.  No confirmation has yet been disclosed but obviously Ms. Lam has not been able to quell the protesters. Not sure a change of face will do it, but probably worth a shot.

China News:   Tweet bound……

Currency News:  British Pound getting whipped around by BREXIT; $YUAN stable

Bonds.  If price cant recapture $139.50 it would be a bullish development. Notice the bull divergence on the indicators. RSI and PPO were higher even as price was lower.  If price clears $139.50 I think it would be worth a long try with a stop just below.

$USO  Nice move higher but giving some of that back this morning. .

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 )  

$XOP This ETF tracks oil & gas production.  Note the double bottom with the bullish divergence on the indicators. This is often a very bullish set up. One could get long against the low which is close by when you could place a stop.  Obviously this will track oil pretty closely.

$GLD  and $SLV still consolidating as equities push higher.  Key levels on gold futures ( /GC ) are $1492 and $1500.

$UUP  Price dropped below the falling wedge and key support.  Lower prices are now favored.  Falling $USD is supportive of precious metals and commodities.  

$SPY Daily

Price still remains within the rising wedge. A break below would initiate a sell signal on the daily chart.  Yet again, MSFT / AMZN will move the needle this week.  Watch the big gaps below. Trim and trail long positions.

Swing Traders.  No technical changes as we play the waiting game. 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

No changes. The levels remain in place as we bide time.

Bear Set up:   Sell set up comes on break of up trend line. Other 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:  Bears are in short term control with the break of trend.  As price moves down, support locations would be places to try a long with a tight stop. To my eye, $298 is a key level to hold. Breaks below favor more downside.

$QQQ Daily

Price is still within the triangle and above support. Closes below trend will initiate a daily sell signal.  MSFT and AMZN have the potential to jack price all over the place.  Dont get all excited about today’s action either bullish or bearish because it will most likely change tomorrow.

Swing Traders. If you’ve been long from lower prices, maintain that position and hope for a breakout.  I’d be concerned if price breaks below the uptrend line off the June low as it would indicate a technical breakdown.  We are supposed to breakout here, so anything less than that becomes a sell signal.

QQQ 60 min

Price generated a 60m sell signal on a break of the low side of the up channel. Regardless of how today plays out, please realize the $MSFT can and most likely will move the needle tomorrow. If you hold QQQ positions overnight, you’ll have gap risk in either direction.  My plan is to be flat with no overnight hold.   The commentary below remains unchanged from yesterday.  We are at step 4 of the bear set up. The bear roadmap played out well.  We are set to gap lower. Watch the flash gap fill higher. Bears are in short term control.

Bear Set up:   Shorting locations.  1. A rejection of new highs near $194. – $194.50    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 $192.60 traders can stay long ( depending on your entry ) 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.   I do not like the double doji look over the last couples days, but as long as $153.90 holds, bulls have no reason to exit.   Continue to trade level to level while moving up stops.

Swing Traders.   On the daily time frame, Bulls are ok above $152.  If you want to maintain a tight leash, $153.90 is your exit on a break below. If price can hold $154 bulls can look for $156.50 area as a next target.  The indicators favor a further advance.  Bearish swing traders get a confirmed sell signal below $150.

$IWM 60 minute – No Changes

Bear Set up:  On a break of $153.90, get short and look for a gap fill to $152.61.  I would be prepared to cover at $152.50 where a bounce would be favored; then flip long with a tight stop.

Bull Set up:  Bulls ok as long as $153.90 holds and can keep $156.50 in their sights as a target.  Close long positions with a break below $153.90 as a gap fill is favored.  Look to re-position long at $152.50 with a tight stop below.

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

Trade set ups

$SMH Daily   $TXN results may cast a bearish pall on the sector. A break below $118 would trigger a sell signal targeting the 200ema. A hold at $118 would be a positive development for bulls.  If you’ve been long from lower levels, $118 is your line in the sand for an exit.

$MCD Weekly  Updated chart. Let’s see how the week closes. I expect price to hold here but regardless we will have a tight set up to try a long or a short depending on if price closes above or below trend.

$PAYC Daily  –  So mad about this. Had it all set up and forgot to post.  $190 is support, a break below targets $170. On a break below, get short w/ a stop just above. Earnings are next week on the 29th. Exit position beforehand. THe way this is moving, it could lose $20 by then so dont think there isnt time.

$IHI  Weekly  Medical devices ETF.  Featured a few weeks ago. This is on an intermediate / LT sell signal with a break of the weekly trend. If you are going to short this, do it now with a stop just above the top of this week’s candle. I’d go out to at least January with  $240 or $235 puts  or put spreads.

 

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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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