Tickers discussed:  SPY, QQQ, IWM, XLY, CYBR, MCK, HD

The Daily Profit Compass  provides the stock market outlook 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 –    This year’s “Must have” is next year’s junk in the closet.

We live in a consumer-driven economy and materialistic society that values “stuff”.  My old counselor  George used to contend that many of our purchases are made to mask pain.  The good feelings we get after buying / receiving something only lasts only a short while and then we’re back in the soup. Those feelings of elation, accomplishment and success linked to that new pair of shoes or sharp looking suit long since faded. As we head toward the gift – giving season it brings this “fact of life” into focus.  Heading into 2020 is the perfect time to re-examine ourselves and re-focus our efforts to identify and correct whatever things are keeping us from remaining happy whatever happens.

Headlines

  • $BA down sharply as it considers production halt on 737 MAX
  • $IFF merging with Nutrition unit from DuPont in a deal worth $26B
  • German MFG slump deepens; Car companies are threatened by China over Huawei ban
  • Markets green across the board; Santa Rally beginning?

Earnings Calendar

FDX, MU, NKE Headline earnings this week.

Market Observations, Technical Developments, Outlook,  and Strategy

Final Year – End Push

Not a ton of commentary to add this morning that was not covered in last night’s Weekend Profit Navigator. If you missed it, you can find it HERE

A lot of uncertainty was removed last week and futures are off to a good start.  The thing to watch for today and early this week is if the gains can be held and built upon.  If so, the potential of a strong close to the year is bolstered.

Watch the opening gap this morning.  It’s pure speculation, but I think you will see more gap-camp-ramp market action.  Over night gap up followed by a tight trading range all day until the last 45 min of trading where they ramp the close.  Seems like this is what we’ve had most sessions. That said, dont underestimate them trying to fill the gap below before under taking new business.

Little changes to the technical picture on the indexes since Friday’s price action was for the most part muted.

 

Strategy Update:  Ratchet up stops; maintain a bullish bias ; Hunt for objective, low-risk trade locations on stocks where you can get in with a clear stop in place in case things don’t work exactly as planned.   Avoid full FOMO of buying everything in sight. Dont sacrifice set -up quality because of FOMO.  There is plenty of time to make money.

  • Maintain bullish bias while keeping your head on a swivel.
  • Set tight stops depending on your time frame; trim n trail
  • Keep long exposure in balance with your risk tolerance.
  • Keep some dry powder ready; to take advantage of any one n done pull backs.
  • Be aware of the yellow flags; ( low volume climb, ultra low vol, poor market structure loaded with gaps ) collectively they simply mean to be careful.
  • Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails. That said, those key support levels are getting farther and farther away.
  • Nimble, active traders can hunt for momentum plays intra-day with the plan to close at the bell.

 Market Participant Positioning.  As we move forward, keep in mind that as we moved into thin air over the past couple weeks, it has been on low volume with most of the shorts either being dead or squeezed out.  Having shorts in the market provide a buffer on the way down as they cover to take profits.  With short exposure lower than normal, that buffer wont be there so faster downside moves can happen.  Additionally, there may be weak-handed longs out there that were happy to milk every last cent of the rally but may hit the exits quickly at the first sign of trouble.  These are not predictions, just a heads up that if sell-side activity ramps, prices may fall further and faster than what you’d normally expect.

$SPY DailyMove stops up to $314 at the top of the first gap. A move to reclaim the upchannel I have drawn would be bullish. Prices above $315.50 are bullish. Prices below could see $314.

Swing Traders.  Stay long against the breakout at $315.50. Prices are above the 8ema with all the ema’s bullishly stacked.

$SPY 60min chart

Bear Set up:  Not many.  A move below $315.50 would favor a back-test of $314; below $314 favors a back fill of the gap to $312. Bulls in control with downside moves thwarted recently.

Bull Set up: Buy a break above $317.50 with room to run toward $319.50 until top of rising wedge is hit. A backtest of $315.50 or even $314 would be good locations to try new longs or add to existing ones w/ stops below.

 

$QQQ Daily

Move stops up to at least $204 at the top of the first gap.

 

Swing Traders  Stay long against $204 regardless of where you entered on this cycle. For those that want a really short leash, a stop just below $206 would work.  As always, rolling option positions up and out would accomplish similar results by harvesting profits while still staying long.  

QQQ 60 min

Bear Set up:  A drop below  $207 keeps moves to $206 a possibility. Below $206 and $205 is in play.  Keep in mind, bulls are in charge.

 

Bull Set up:  Traders can get long on a break above $207 and look for a move to $209.50. Pull backs to $207, $206, $205, and even $204 can be bought w/ stops below to build a bigger position if desired.

$IWM  Daily 

Lackluster action on Friday, but no technical damage. Move stops to $162.50.  Traders can add to or initiate long positions all the way back to $160 if price decides to back test those locations again.  Prices below $160 would begin to tilt the chart bearish.

$IWM 60 min

Bear Set up: The gap between $162.50 and $161 was never filled and represents the first real opportunity for bears.

Bull Set up: 

Buy a breakout above $164.50 and look for $166.50. A pull back to $162.50 should be bought with a tight stop.  Prices below $162.50 would favor a gap fill to $161 so any long positions should be exited and then look to buy back at lower prices at either $161 or $160.

 

 

 

**************************  TRADE Updates and positioning   ************

Long $KL Jan 40Cat $2.01

Long GDX long Jan 27C

Dec 6:   Long GTT FEB 15 C at $1.15- stopped at $11.50 on Friday; looking for re-entry

Dec 15  SJM Jan 100 P at $1.70

 

************************ Trade Set ups and Charts ********************

$MCK  McKesson is approaching an area of support at the confluence of the 200ema and uptrend line. I have alarmed $137.50 for potential buy.

$HD – Although there is certainly the potential to fill the gap below to around $205.50, I am alarming $215 as a buy trigger coming out of the bullish falling wedge.  I will also alarm $210 as a downside head’s up if the grand plan doesnt work out.  Prefer to take the name long if it triggers.

 

 

$XLY   If $AMZN regains a pulse, it should be reflected in $XLY.  I like this long above $124 and have set an alarm.

 

$CYBR  Get long against the breakout with an eye toward a gap fill to $132.50 – $133ish

 

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