Trades about to happen

“Trades about to happen” are trade ideas for stocks and sectors ready to make a move. For each trade idea, i will give you levels to alarm for entry, potential targets, and other key information to glean from the charts.

More About “Trades about to Happen”

The idea behind “Trades about to Happen” is to keep your trading “pond” fully stocked with ideas ready to trigger so you can focus on executing trades rather than sifting through hundreds of charts to find the set ups. Additionally its important to understand I am a technical trader. I do not consider fundamental factors for these set ups. If you incorporate fundamentals into your criteria, simply apply those considerations to the set ups / stocks of interest. When the fundamentals and technicals align, you should have a nice trade set up.

How to leverage “Trades about to Happen”

Not all the set-ups I provide will be appealing to you. For those you are interested in set alarms at either the level I suggest or at a level where you want to be given a “heads up” about the trade. Once your alarm triggers, you can re-focus on the stock and potential trade. Depending on your current portfolio positions, view of the market,  and other factors you may or may not decide to take the trade.  If an alarm triggers and you don’t take the trade, re-set your alarm at a new level where you’d want to take another look.  In this way a stock won’t run away from you without you being aware.

$DJUSAR –  Airline Industry Group  – Daily

Glancing at the chart of the airlines group one can see the past year has been a series of uni-directional moves either up or down.  Notice the positioning of the RSI indicator ( top panel ) and the PPO indicator ( second panel).  Each time the RSI trendline was violated and the PPO put in a high-level PPO bear cross, price moved down, broke its uptrend line and moved sharply down.

While past action can’t guarantee the future, look at where we are now.  The RSI trendline has been violated. The PPO has put in a high-level bearish cross, and price has broken below it’s steep uptrend line.  Sound familiar?

Bottom Line:  To my eye Airlines are poised for a correction . What would make me reassess the set up is if price moved above $285 and trend line resistance. Keep in mind that $DJUSAR is not a trading instrument, its a tracking index for the group.  If the group is poised for a downturn its a reflection of individual components.  Look at the leading components like $AAL, $ALK, $DAL, $HA, $LUV , $SAVE, $UAL  etc for particular individual set ups.  If you’re long airlines it is time to sit up and pay attention.  Turbulent air may be ahead.

$FDX – FedEx  Daily

The problems FedEx has had over the past year has been well documented by others.  Those problems have been reflected in the chart by a persistent downtrend.  Price lost the 200ema in October 2018 and has never recaptured it.

Now price is back to the downtrend line and at a critical spot.  From a TA perspective, resistance is resistance until it is broken.  Price tried to punch through both on Thursday and Friday of last week and was rejected.

Bottom Line:  This is obviously a key spot for both bulls and bears but the bears are in control until proven otherwise.  This is an objective place to try a short against the downtrend line with a stop just above.  If the bulls prove they can take out the down trend resistance, tip your hat and exit the trade.  If that were to happen I’d sit on the sidelines until the bulls take out the 200ema just above. If they can do that, I’d get long against the 200ema.  If FedEx has truly fixed everything and is heading back to $250 the entry $10 higher won’t mean a thing in the big picture.

A little about earnings season and the gaps they produce

I step aside on individual stocks during earnings season because I view “playing earnings” as a dart throw.  I have no edge.  One thing I do look for in earnings season are gaps, either up or down,  resulting from the earnings reaction.  As a technical trader, fundamental analysis is not part of my process. For me, earnings gaps speak largely to fundamentals and trader sentiment surrounding the earnings results and forward guidance.  That is valuable information.

Another reason gaps are important is because they usually get filled.  I do my best to keep track of them and alarm gap levels for a heads up on a potential gap-fill trading opportunity.   I call these set -ups “Range Break Trades”.  You alarm the high and low of the trading range the day of the gap.  Then you let price dictate the next move.  You “go with price”  on the break of the range. Let’s look at some set ups.

$PTC – PTC Software –  Daily

Software player $PTC was whacked $20 after cutting FY ’19 outlook and multiple downgrades setting up some interesting trading opps.  Let’s look at the levels.

Opening Range: $72 – $78  Alarm these levels  Open Gap: $78 – $92 Key Resistance: $78  Downside targets: $66 and $59 ( from weekly support )

Note:  In general, future direction of price favors a move in the direction of the gap.  Gap up >>> Higher prices   Gap lower >>> lower prices.

Trading Ideas

General Strategy:  Above $78 get long with a tight stop just below. Shoot for a $14 gap fill.  If price breaks $72 get short with a stop just above and look for lower prices.

Nuanced Strategy

Bulls:  Price is at the low end of the range. If you think dip buyers will pile in and market conditions favor an advance, get long now with a stop just below $72.  You could very well get a $6 move if price decides to back-test $78.  If it breaks through $78 you’ll be well on your way.

Bears: If price decides to back test $78, it would be an objective place to try a short against big overhead resistance. If price gets rejected there and heads lower and breaks $72 to the downside you’ll be in the drivers seat.

$MMSI   Merit Medical Systems – Daily

The sizable gap down in $MMSI after its Q2 miss and guidance cut sets up for a potentially nice range break trade.

Trade Ideas

Opening Range: $39.11 – $44  Alarm these levels                                                      Open Gap: $44 – 54.84    Key Resistance: $50

Get long on a break above $44. At the least, look for a backtest at $50 which is $6 higher. If it punches through, look for $54.84.  Either way it would be a very nice trade.

Get short either on a break below $39.11 or an impulsive rejection at resistance at $50.  Its not a coincidence that $40/ $39 is support on the weekly chart so its a key level. If it breaks look for much lower prices.

$NTGR  NetGear – Daily

NetGear gapped up and filled a prior gap in the process.  Price took out the 200ema at $31.50 which is always a big level.

Trade ideas:

I am setting an alarm at $35, $31.50, and $31.  In a perfect world I’d love to see price back test of the 200ema at $30.50 and hold. I’d be an interested buyer there with a tight stop just below.  If that does not happen I’d be an interested buyer if price can take out lateral resistance at $35.  Upside targets are shown.

If it all falls apart and price loses gap support at $31, it is a short set up for a gap fill below.

$SAVE – Spirit Airlines   Daily

Spirit Airlines experienced a rough earnings reaction as traders pulled the rug from $55 to $42.  It’s a prime example why I step aside for earnings. They actually beat their numbers but its the reaction we’re interested in.

Trade Ideas

Opening Range: $42 – $46 Alarm these levels                                                            Open Gap: $46 – $55     Key Resistance: $46

Get long on a break above $46.   Look for price to grind higher and eventually fill the $9 gap.  Set your stop just below $46.

Get short either on a break below $42  or an impulsive rejection at resistance at $46.  Support off the weekly chart sits at $35. / $39 is support on the weekly chart so its a key level. If it breaks look for much lower prices.

$JMIA  Jumia – Daily

Do you remember Jumia?  They’re supposed to be the Amazon of Africa.  After rocketing from an IPO pricing of $14.50 to almost $50 in a few days, its been downhill ever since.   So bad in fact that price is set to test the lowest traded price since the IPO which is $18.22. Price hit that level twice.

Trade Ideas

First off support is support until it isn’t.  If there are bulls out there they should be stepping in soon.  The first bounce target is $22 at downtrend resistance.

If however support breaks, I’d expect a rather fast move to $14.50 which was the published IPO pricing.  That level would probably get defended pretty well, but at that point in my mind it would look like a broken IPO.

$PLAY   Dave And Busters – Weekly

Short n Sweet.  Dave and Busters is near to a test of multi year support at $37.50.  To my eye the recent action looks like a bear flag.  If it is and price breaks $37.50 you can see the measured move is way down there.

That said,  buyers of $37.50 have been well rewarded.  Support is support until it isn’t.  I’d expect buyers to show up at $37.50.   Alarm $38-$37.50 for a heads up.  I’d be willing to try a long at multi year support with a stop just below.  If it didn’t hold, I’d quickly flip bearish and look for a deep down move.

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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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