Tickers discussed: SPY, QQQ, IWM, TLT, OKTA, CRWD, MAR, BBBY, AMZN
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: Handling Mistakes
Staying graceful and humble after a super-sized success or in the face of a humiliating loss caused by a mistake is very difficult for many people. While there are certainly times when I want to shout from the rooftops “look at me” and times where I beat myself up over stupid mistakes, I think it’s mostly under control. I don’t have a big EGO to begin with so in that respect it’s probably easy for me than most. Whether you have success or make a huge blunder, do your best to take that middle path as best you can. People notice success when they see it. You don’t need to do anything. When you make a mistake, don’t throw a tantrum or beat yourself up. Simply learn from it and move along.
Earnings really ramps up this week and it could not come at a more critical time. Key FAAMG names headline the week along with several marquis names in other sectors. AMZN and V after the bell. XOM / CAT / CVX / HON / PSX tomorrow.
- $AMZN does a moonshot and rejoins the $1T club.
- Corona virus continues to track its exponential growth curve as caseload and death count mushroom.
- The W.H.O. declares a health emergency and the market rips. Weird; but that’s algo’s for you.
- IBM dumps Rometty for Krishna; stock pops
- The UK says goodbye to the EU after 4 years of talking about it.
- Markets whipsaw off Corona fears and earnings results.
Market Observations & Technical Developments
Life is good for Jeff Bezos, founder of $AMZN. I mean you’ve got a new girlfriend, you’ve got a new life, and your company just re-entered the Trillion dollar market-cap club. Yes indeed life is good. Life is also good for Amazon bulls. Looking at the chart, if price can hold its breakout above $2035, and clear $2050, it could be well on its way to $3000 and beyond. Note from the chart the massive cup n handle formation that took 18mo to build. The measured move is the depth of the cup add to the breakout level. They say the best time to plant a tree was 20 years ago, but the second best time is today. The very same analogy may hold for buying $AMZN stock. On a close above $2035, you buy it; set your stop just below, and then wait. If you get stopped out, that’s trading. But if you don’t get stopped out, you may find yourself under a shade tree in 5 years with the stock north of $3000. Not a bad place to be.
Not a lot to say today. Lots of cross currents are jacking both over night futures and the regular session. Still leaning slightly bearish but I’d be lying to say the case was not dented yesterday. Bulls are close to reclaiming all the key levels on SPY / QQQ. IWM remains rough with bears in control there. I dont know if the algos factor in a China Sunday night re-open after 10 days of being closed for 10 days, but you should. Keep risk in line. China limit down scenario unless Xi decides to buy everything until Corona is subdued. WE have Iowa Monday night, another market risk. Enjoying SuperBowl Sunday unencumbered with weekend risk might not be a bad way to go.
Wall of Worry
- January 28-29 FOMC Rate Decision – Powell said next to nothing new. Market sold off.
- Big Cap tech / FAAMG All report over next couple of weeks; These names dominate the cap-weighted indexes. Hiccups or disappointments will be felt.
- February 3: Iowa Caucuses – Bernie surges in Iowa; Politics will be a destabilizing factor in all of 2020;
- February 3: China Markets re-open after extended closure due to holidays and Corona. Potential for a limit-down kinda day
- Potential double whammy for US Markets if China gets ugly Sunday night and Bernie wins in Iowa Caucus Monday night.
- Geo-Politics: Iran isn’t going away.
- Round Numbers: Markets love round numbers. NASDAQ 9000 check Dow 30,000 close. SPY 3500 Ring the Bell, pull the rug?
- FED Liquidity: If the FOMC is hell-bent on blowing a SPX 4000 monster bubble, they have the money to do it.
Strategy – Bulls chip into bear case; still leaning bearish, but conviction waning
- Huge intra day reversal Thursday dents bear case but now futures are down this morning. If yYou wanted 2-way trading with a healthy dose of Vol; you got it.
- I peeled off some short exposure yesterday when the grand plan did not work, but still leaning bearish, just less so.
- The key levels we’ve been watching are still relevant.
- Big catalysts in place for Monday with China re-open and Iowa Caucuses.
- If bulls can recapture the big breakdown candle high, then the pull back was a one n done.
- If bears rolls price over at a key fib level or upon the fill of the gap above, we most likely head down
- A break of Monday’s low would seal the deal and favor a 50 ema test on SPY.
Price went down off the open to close the Tuesday gap, but fell a few cents shy of doing that before reversing. THe bears took a body shot yesterday but ask yourself ” How much do I want to get long in front of a China Market that been closed for 10 days and a potential Bernie win? I think there is something to be said for going home light, enjoying the SuperBowl without a worry in the world and picking it up next week. Back to the numbers. A close above $328.63 kills the bear case short term. A close below the 20ema at $326.44 bolsters bear case.
Bear Set up:
Bears need to reclaim the 60m downtrend line at $326.50. Because the Tuesday gap was essentially closed the target is yesterdays low of $323.54 then the Monday low of $323. Below $323 brings in more sellers.
Bull Set up:
Bulls need to reclaim the 8ema and $328.63 to open the door to higher prices. Bulls need to hold $323 at all costs to prevent a 50ema test.
Swing Traders Price got a bounce off the 20ema. Pretty obvious that $222.50 is the key level having held 2x. Above $222.50 = bullish, below keeps the possibility of lower prices alive.
The first target is the 20ema at $219.50. Next is the bottom of the rising channel near $218. Below $218 brings in more sellers.
Bear Set up:
Stay short against $222.50. Much above, take off the bear suit and enjoy your weekend. If price stays below $222.50, then a move back to the 20ema is a first target, then a break of the channel is next.
Bull Set up: Close above $222.50, force shorts to cover; enjoy the Superbowl. If Bears get angry, you gotta play defense and hold the 20ema and by all means the rising channel. You lose the Monday low and the channel, get out of Dodge. Here comes the 50ema near $212.
Price held the Monday low, but still closed below the 60min downtrend line. Bears still in control.
Bear Set up:Keep price below the down trend line. Stay short below it. A move below Monday’s low at 162.50 keeps things headed south. Targets are $161.50, $160.50, 159, 157
Bull Set up: Bulls need a break above the downtrend line and a close above $165.50 You can look for bounces at support, but bears are in control and bull moves are counter-trend bounces until $165.50 can be taken out and held. .
$BBBY – I took a small opening short position late yesterday with April 15 Puts. There was 4x normal put volume and the P/C ratio was 5.5:1. A simple move to the 200ema will be a win. A break of the 200 sends it way down. Setting a stop at 50% of premium paid. Earnings in Mid -March.
$WDAY: A name in our chart review. Breaking out despite market turmoil. Looks great.Stay long against the breakout
$CRWD Back test give and go. Still set up to reach $72.50. Now with the back test complete, no reason to head back to that chart location. Still like it long.
$OKTA – There’s your breakout from the location we flagged. Long against $130. Go Time.
$MAR Look at that perfect bounce off the 200ema but right back into the teeth of resistance. Great trade location for both bulls and bears. A break above and hold of $143.25 and bulls can get long with a tight stop. If you’re bearish you can try a short against $143.25. Right or right out on either play. I think edge favors bears. The call it overhead resistance for a reason.
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