Daily Profit Compass Sept 1

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Tickers discussed: SPY QQQ IWM  WW WSM  OSTK APRN CWH   Key option order flows  Strategy & Tactics

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.

Trader’s Couch 

In my experience the path to better trading is more a process of letting go than anything else. Let go of the desire, the need to be right, the need for certainty, the use of a complex trading process, the constant comparison to others, the desire to find a shortcut and a hundred other things. The problem for most is that letting go of crutches and preconceived notions is a lot harder than grasping desperately for new things.  Start peeling back the layers of the onion traders. Then you’ll probably laugh at the things you used to hold onto or cry at the time wasted while doing so. In my case I did and continue to do both.

Earnings

 

ETFs with the most liquid option chains

Be ready when the sheep hit the exit

( re-post from yesterday )  keeping the approach front and center.

A lot of charts there that if you are not careful can lead you under your desk and have you crying for mommy. My strategy is this. Accept on faith we are in a FOMO bubble. Accept on faith that one random day or overnight that we will sell off 100 ES handles and then sell off more in the days that follow as traders hit the exits. Accept on faith you won’t be the first guy out. It will happen. The question is when?   It is also quite possible that we keep driving higher as fund managers are forced to participate as FOMO reaches their desks and they realize they are falling further and further behind benchmarks ( career risk ).  Therefore if you want to participate in the above environment, keep your exposure limited to what you can lose. Think of it as a trip to Vegas. Only an idiot takes all their money, stuffs in a briefcase, and gets on a plane to hit the tables. Risk only what you can afford and are willing to lose, because the day is coming when you will lose.  Also, be damn diligent about implementing our “roll and protect” program. When the market gives you a win, take it off the table and reset. You’ll be glad you did when they pull the rug. 

If you are one who is mostly in common stock with deep embedded gains, use some of that money to buy some protection. Look out to October and target say a $340 put. Insure a portion of your portfolio. If nothing else, you’ll sleep better at night. You get hedges when no one in the world thinks we could have a pull back. ( now ).  Waiting until after the fact is too late. Premiums will sky rocket and it will be hard to make them pay.

Notable Option Flows

  • Airline and Cruiselines – the dash for trash has abated to a trickle of what it was last week .
  • Money Center Banks and Regionals: Mildly bearish flows as yields dropped yesterday. Group is underperforming.
  • TSLA / AAPL / AMD / AMZN Dominated bullish flows.
  • GOOGL / FB / MSFT bearish flows
  • SPY and IWM – bearish flows
  • QQQ – Bullish.
  • GLD – and GDX – Neutral
  • TLT slightly bearish

Strategy & Tactics – Got Shorts?

Maintain Bullish bias; be cognizant of the many yellow flags; Time to have a stocked pond of short ideas.  We’ve noted the narrowness of the market many times. If the top stocks falter, the lower tier will fare worse. Let’s set some alarms on the short side and not be afraid to work some into the mix

  • FAAMG – THe 60 min levels on these names have been pure gold. Use them to your advantage if you are an active traders.
  • Staying bullish does not mean complacent
    • Stay vigilant! Ratchet stops / Strikes higher on your winners and keep exposure at manageable levels.
    • Dont be afraid to go short if you get a price signal; especially if you’re holding a bunch of longs. You’ll like that balance on red days. 
    • Mark clear levels on your holdings for exits; honor those levels on a pull back.
    • You know they can pull the rug at any time for no reason at all.
  • Stay Fluid and flexible in both positions and thinking; Dont lock in on Narratives.
  • Expecting a hi-vol summer with Covid and political headlines whipsawing markets

Got Shorts?

Time to re-stock our short idea watchlist; here’s a start

$APRN – Blue Apron

A shame we did not nail the bracket trade from the breakdown but there may still be plenty of opportunity. A break of $6.25 sends this toward the March lows. People are no longer terrified to go to the grocery store.

$CWH Camping World

CEO Marcus Limonis needs to quickly get back from taping the Profit. If this loses $28 its looks like a quick trip to $21 to test the 200ema. Somebody else thinks so too. 20 min before the close, a sharpie unloaded with Sept 29 puts 3300x at $2.50 ask. Notice the volume / price support drop off below $28.

$OSTK – Overstock  60min

Showing the 60 min for clarity. Although there maybe a bounce here at support, on a break of $85 this could go fast toward the low-mid $60’s. Very objective level here at $856 – $85 to take a shot on a breakdown

$WW – Weight Watchers

Clear as day. A break of $23 and $WW begins to quickly lose weight. Price sitting on the ledge of nothingness.

$WSM – Williams Sonoma

Alarm $85. A break below sets up a 200ema test at $75 as a move back into the trading rage signals a false breakout and thus targets the bottom of the prior range at $75. Notice also the volume / price void. Some thin air there.

Active Trade set ups / Positions

++++++++++++++++++++++++++++++++++++++++++++++++++++

Aug 31 Activity. 

Bought AAPL Sept 4 calls at $3.  Unofficial trade idea

Aug 28 Activity

$CHEF – Opened a new long position via September $17.50 calls at 80cents following a technical breakout, 5x call buying with institutional support

LVS – opened a new position in Sept 52.50 calls at $2.47.   The gaming space has seen a marked pick up in institutional call buying in recent days.

$V – Price broke to a new high over 212.50. Perfect time to roll our  Sept 202.50 calls to Sept $215 calls @ $4.80.  Booking profits, staying long long against the prior high at $212.50

$DNKN – Rolled Sept 72.50 calls to  Sept 77.50 / 82.5 call spread at $1.45.  Booking profits and staying long

Aug 27

EBAY / CHWY – closed longs.  EBAY simply never performed; CHWY hit our stop right out of the gate.

NIO – closed out longs after a nice win.

Aug 26 Activity

CHWY – Bought Sept 60 Calls  at $3.74    Ahead of earnings on Sept 10 and following institutional call buying.

NIO – trade management.  Rolled out of deep in the money calls  to book a massive win and re-positioned in Sept 4 21 calls but with fewer contracts as the measured move target of $21 was tagged. Noted that unlike yesterday, Put buyers were making their presence felt.  Price has not given any sell signs yet, but in a volatile name like this, that can happen in 15 min.

AUG 25 Activity

NIO – Bought on breakout above $16.

PINS – Stopped for 30% loss. Nice idea, wrong result.

Aug 24 Activity:

TWTR – Opened Sept 41 C for $1.73 on breakout

PINS – Opened Sept 32.5 puts at $1.83   on a breakdown from a consolidation range and into a wide open gap.

Aug 20 Activity: 

XRT- Extreme bearish order flow has again picked up with big players shooting against our long position. In the face of soggy retail numbers and the bearish order flow we closed the Sept 50 Calls for $3.05

$V Rolled stops to breakeven

Aug 19 Activity: 

Trade Idea to get long $V  at the money Sept  Calls against $200.

Aug 13 Activity

$XRT – Sept 50 C ; Closed 1/2 of position.  Entered Aug 5 at 1.90; closed at 2.90.   On the other 1/2 of position sold Sept 53 C for $1.20 credit.  These moves were prompted by extreme bearish order flow into the Aug 28 exp $51 puts over 15,000 x.  Retail Sales and Retailer earnings forthcoming.

EBAY  Opened Sept 60 calls. $1.23. Looking for a move back to the highs

$IBB Closed short position for a small loss.

 Aug 12 Activity

$INTC  I finally gave up on this short. More a time thing than price hurting. Closed Sept 47.50 Puts for about a 30% loss.

$GLD  Re-entered short with Aug $180 puts. Needs to move rather quickly, if it does not, will need to exit or buy more time.

Aug 11  Activity

$IBB – opened Aug $132P   $2.32

$MNST – opened Aug 80P looking for gap fill coming out of bracket low.   $1.02

$CF – Taking a shot at Sept 40 C  at 45c.   after players hit that strike 2600x ++

$DNKN –  opened Sept 72.5 C  looking for a breakout ahead of earnings after the Sept options expiration.

$GLD  Closed puts for massive 340% win.  looking to re-enter;

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$UUP – Initiated Sept UUP Sept 25.50 calls  Aug 3    looks like a fail. Will post if i exit

Index Chart Review

SPY 2 hour

SPY 30 min

QQQ – 2 hour

QQQ 30 min

IWM 30 min

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