Daily Profit Compass October 25

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Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  AMZN, CSCO, TWTR, HAS, CTAS, CMG

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

Rug Pull

The largely range bound action of the indexes were overshadowed after hours as the Amazon earnings miss sent the the stock plunging some $150 or so. They’ve done some repair work on price since the initial drop but still down about $100 as far as I can tell.  Watch price over next few days…if they can fix this one it will be another reinforcing factor showing market resilience.

In other news, INTC presented a nice report and was up AH while TWTR was not so fortunate.  They pulled the rug by 20% on a disappointing report.

These earnings reactions should reinforce to you that “playing earnings” is a losing game. Market makers are paid to win so they price the options so that it takes and extraordinary move in order to win and that is if you guess right on direction.  My humble advice is to save your money and resist the urge to gamble. You have no edge in earnings.   As I suggested to those in the skype room, a much better trade is playing for a run up into earnings and then exiting before the earnings event.

Now we have to look ahead to AAPL on Wednesday of next week along with the FOMC. 2 more reasons for the market to oscillate if it chooses to do so.

Strategy Update:   Continue to pick off intra-day moves but the tight ranges on the indexes have made it harder. I migrated to some of the faster moving names intra-day.  I think gold / silver / and miners are setting up for a nice swing trade.

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.



Bonds.  Bonds have gone soggy. Chopping around.  The FOMC next week will likely have an influence as will the direction of equities.

$USO  A pretty quiet day but price holding above the bull / bear pivot

Gold,  silver and the miners.

I published a blog article AH last night.  I dont think it says much more than the note I sent you at the end of the day, but may put a little more meat on the bones.   Find it HERE

I do not have a position yet, but plan a small starter.

$SPY Daily

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. As I say in the chart annotations, not many bad things can happen with price over all the ema’s and above $298.

$SPY 60 minute chart

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

Bear Set up:  Shorting locations are as follows 1. A rejection near $301.  2. A break below  $298.50   3. A gap entry at  $297.10.  4. A gap entry at $296.25 5 Set a stop just above your entry when and if price heads lower.

Bull Set up:   If price back tests support levels and they hold, those are locations to get long against support with a stop just below. Otherwise, you’re waiting for a definitive breakout.    To my eye, $298 is a key level to hold. Breaks below favor more downside.

$QQQ Daily – No Changes

Price is still within the triangle and above support. Waiting on a break above or below.

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 closed at the top of the box, but is set to open lower this morning as the Amazon effect will be a drag at least initially.  Watch price of both AMZN and QQQ.  AMZN is often a good tell on QQQ even on a regular day. It should be more of one today.  I’d be surprised if we get a range break ahead of the weekend and FOMC but anything is possible.

Bear Set up:   Shorting locations.  1. A rejection of new highs near $194. – $194.50    2.. A drop below $192.60  3. A drop below $191.50 4. A  gap entry at $191.   5. 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 –

Minor changes.    Price is flagging within a narrow range between $153.50 gap support and $155. A break of the range either higher or lower will trigger a trade. Price likely wont go far until the big boys SPY and QQQ decide what they’re doing

Swing Traders.   On the daily time frame, Bulls are ok above $152.  If you want to maintain a tight leash, $153.50 is your exit on a break below. If price pops $155 and holds, a great location to either add or start a long position with an eye toward $157 / 158.    The indicators favor a further advance but the gap below is unfinished business.

$IWM 60 minute – Minor adjustments to plan

Price has moved into the gap a couple times but without follow through.  Yesterdays low now defines the low side of the consolidation box / flag at $153.50

Bear Set up:  On a break of $153.50, 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. Another objective place to try a short is at the top of the box at $155 which has been rejected multiple times.  Eventually it wont work, but that is what stops are for.

Bull Set up:  Bulls ok as long as $153.50 holds and can keep $156.50 in their sights as a first target.  On a break above $155, either add to or start a long position is fine.  Close long positions with a break below $153.50 as a gap fill is favored.  Look to re-position long at $152.50 with a tight stop below.

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

Trade set ups

$TWTR  Daily   Nice range break trade set up on the gap down. Follow price on a break outside the range.

$CMG Daily  Price flirting with a ledge of support at $785. A break below should find $720. Note the RSI and PPO heading out of town.  Bulls can be long against $785 but beneath that level has to be a hard stop.

$CTAS Daily.  –  Broke out yesterday.   Traders can be long against the breakout at $270. Earnings Dec 18

$HAS Daily   Good example of a range break trade after the gap down. Alarm $94.  I expect price to find this level. If it holds it will be a nice long entry. If it doesnt it should be an excellent candidate to fill the sizable gap below. 

$CSCO  Weekly. The “h-sell” set up favors a break of $46 and a move to $40.  That said, its only a set up and requires a weekly closing price below $46 as the trigger.   Earnings is in 3 weeks.  Go ahead and alarm the level. If QQQ has a big breakout, this would be a good place to anchor a long because CSCO would likely follow the Q’s.   Be patient here


Restaurants remain under pressure.  Many charts are on the verge of substantial breakdowns. If you want to explore it more deeply, on October 15 I posted a piece on restaurants.  Find it HERE 

$AMZN – Daily   Not trading it, but here is my chart with the key levels marked.  Holding $1675 seems important. Price tagged $1618 AH last night, so it tells me the $1616 level is right.  Any close below $1752 is bearish and it will take a lot of work to get this chart fixed.

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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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