Weekend Profit Navigator Jan 24

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Tickers discussed: SPY / QQQ / IWM / FB / AAPL / TSLA / MSFT / AMZN / GOOGL / NFLX / DBA / COPPER / WTIC

The Weekend Profit Navigator provides a big picture stock market technical analysis for the week just past with a look ahead. 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

Earnings ramp this week with marquis tech names headlining those reporting.  Last week NFLX made a massive jump off their report so we’ll have to see the crowd reacts to the balance of FAAMG+T names as they report.   Lots of big names across diverse industry groups fill out the week.

Economic Calendar

Busy calendar this week, headlined by the FOMC meeting and rate decision Wednesday at 2pm.

  • Monday: Chicago Fed and Dallas Fed activity indexes
  • Tuesday: Case Shiller / Home price index / Consumer Confidence / FOMC meeting begins
  • Wednesday: Mortgage Applications / Durable Goods orders / Oil inventories 10.30 / FOMC Rate decision 2pm / Powell presser 2.30pm
  • Thursday: Q4 GDP / International Trade #’s / Retail & Wholesale inventories / New Home sales / Leading economic indicators / Jobless Claims / NatGas inventories / KC fed
  • Friday: Employment cost index / Personal income / Consumer sentiment / Chicago PMI / Pending home sales

The latest “Bubble Watch” Graphic

Non-Profitable Tech Valuations go vertical

Although the exact methodology of how $GS built this graph is not instantly apparent, the graph was widely circulated this week as evidence and further confirmation of the “frothy” valuations in certain segments of the market. Now, non-profitability is a bullish catalyst.     As I’ve been saying lately, I am not sure the bubble can / will pop when there is a bubble in “bubble watching”.    That would make it far too easy for an “I told you so victory tour”.    Seems almost like the bubble needs to suck in more “bubble watchers” before a correction can occur.  The pain trade is higher.

Don’t forget, that while the above may serve as interesting conversation points, we won’t be guessing about or worse, trying to pick the bubble top.  We will see it in real time.  We will see price lose the 8ema. We will see price lose the 20ema. We will see the 8ema cross below 20ema etc. These moves may come dramatically and quickly like in March or more subtly as a roll over top. It doesn’t matter. We should be able to see it.

Cathie Wood’s ARK continues to Float higher.

ARK Investments founder Cathie Wood has gone from obscurity to Crazy Cathy after her TSLA $6000 call in early 2020 to full -fledged rock star in the world of ETF’s as massive inflows continue to find her funds.  In the first 3 weeks of 2021, ARK funds saw $6.8B of inflows second only to Vanguard.  The names within her funds are and have benefitted greatly from the massive inflows. If you wanted to, monitoring  / trading ARKK, ARKF, ARKG, ARKQ, ARKW would be great proxies to “trade the bubble”.   The tickers are heavily traded and from what i can tell, the option chains are equally robust.  Trading ETFs like this are perfect for expressing a view on a sector through earnings season because you eliminate the single stock risk and the post earnings IV drain that happens after the earnings announcement.   Note: ARK is adding a “Space” themed ETF   ARKX.   No specific date for trading has been given but it should be fairly soon.

 

 

A thought provoking list of “outrageous predictions” for 2021 from Saxo Bank.   A fun list of possibilities that stimulates out-of-the box thinking that is not correlated to the herd.

Find the List HERE

High Short Interest Stocks

If you’re an active intra-day trader, pay attention to highly shorted stocks. I am sure you heard about the move in GME on Friday where there was a massive bull raid on the stock pushed it up by 50%.  There are some massive intraday moves being seen on high short interest stocks.  Here is a list

If you are interested in trading these, set yourself some alarms and be ready to move quickly. Because the moves can be outsized I recommend curbing your enthusiasm for max leverage because it cuts both ways. One or two contracts should provide you with enough potential to keep things interesting but not terrifying.   You can keep your finger on the pulse at highshortinterest.com  and if you’re interested in trying to pick up on the next bull raid bum rush by the Robinhooders, you can hang out in reddit sub room r/wallstreebets.  Better yet, get involved in our trading room. Sharpshooters in the room  are calling moves out all day. Find a registration link below. We’d love to have you join the team!

Keep in mind, the above is pure speculative trading and has nothing to do with company fundamentals or even what is happening in the broader market.  Consider the money you allocate to such trades as having 100% risk. 

The Reflation Trade Wobbles

The reflation trade has had a vicious run since the Nov 9 Covid vaccine igniting candle and has since become a consensus trade.  In Summary  Short $USD, Short TLT with rising yield expectations, Long basic materials and commodities, long banks, long re-opening names, long value.   This week we saw that trade theme wobble with yields falling and the USD finding a bounce. Maybe a situation of too far too fast and now either a baby pull back or consolidation is in order.  Trading is all about timing and time frames so while I am still in the reflation camp mid to longer term, I can easily see a $USD short squeeze bounce and yields fall further.  We saw some confirmation of this also this week with mega cap tech waking up in a big way as money flowed out of value and into growth.  These rotations have been swift and there has not been a lot of time to ponder on positions.

I want to be ready to BUY a material dip in commodities and other reflation trade names.

$CRB Commodity Index backs off DT resistance

A pull back to 165 support makes technical sense. If 165 does not hold, then 155 becomes key support.  Alarms set at 175, 165 and 155 would keep you dialed in on the commodity side of the relation trade.  THe ticker $CRB is supported by most platforms. There is also a Bloomberg Commodity index out there you can track as well that shows similar info

$DBA – Ag input ETF bumps its head on resistance.

Grains ( $CORN, $WEAT, $SOYB ) have been on fire and are important components of this Ag -centric ETF.  As you can price backed off at resistance.  A breakout targets $18.50 as T1.  Take note of the fib pull back zones. 15.31 / 14.90 / 14.50.   A simple fib pull back would offer nice trade location for a leg higher.

$DBA LT breakout

Got $CORN?   Is the 10 year bear market in Ag Commodities coming to an end?  Farmers hope so.  A breakout on the monthly chart is something to pay attention to. The 2014 breakout proved to be a head fake but I think this one sets up as the real deal. Time will tell.  If it is, we’ll be getting n early on what would be a multi-year uptrend.   Other Ancillary plays include $DE, Fertilizer like MOS and CF, processors like ADM and BG.  Might prove to be headwinds for chicken producers like TSN, SAFM, PPC if feed prices do a moon shot.   As you look at these charts, back out 10 years. You’ll see stocks like $MOS used to be $60 plus.

$COPPER

A 10% pull back to back test the breakout would be technically elegant and a common move.  Look to buy the dip on a pull back to $3.30.  FCX and SCCO would be the places to look for a proxy if you did not want to mess with copper directly. Both will trade with the commodity.

$WTIC Oil

Oil found resistance at the downtrend line. A pull back to the 47.50 / 50 area should be expected. While not expected a pull back to 42.50 to back test the breakout is a technical possibility and would terrify a great many people.  A breakout above $55 would be an important breakout and would point to a move into the $62.50 area.  If you are not interested in trading the commodity, look at ETFs like XOP for trading a basket of producers.  I dont like XLE because 50% of the index is XOM / CVX…..not a lot of juice there. If you like individual names, look for target zones for a long entry on a pull back.

Meanwhile FATMAAN wakes up

Big gains across the board, except for TSLA which is in consolidation mode, as the reflation trade wobbled and money piled back into growth / mega cap tech.   Most of these names report this week and with positive market responses can have the juice to pop the overhead resistance on the weekly charts

Facebook

A weekly close above $280 opens the door for another run at $300 on the breakout.

Apple

Apple posted an all-time weekly closing high but with bearish divergences. Technically has room to run. The bearish divergences are cautionary but not sell signals.

Tesla

Tesla consolidating after a monster candle 3 weeks ago. THe best of all possible worlds for Tesla bulls is a multi week sideways consolidation that allows for the ema’s to catch up and for further upside momentum to regenerate with out a massive pull back in price.  If you got a pull back to trend in brown, I think you gotta buy there with a stop just below. A break of trend could send the stock all the way back to 450 to back test the original breakout.

Microsoft

This one is pretty simple. Price needs a weekly close above $230 to open the door for $250 plus. The 6 month consolidation provides the perfect set up for a leg higher on a breakout. THe breakout if it comes will have bearish divergence but that said, I think you have to buy the breakout against $230 with a stop just below and hold on. A risk worth taking IMO

Amazon

The $500 wide 6mo consolidation points to a technical target of $3900 if there is a weekly close above $3400. If you get that, you’ll have bull crosses on PPO, RSI breakout, but with pesky bearish divergence keeping us on our toes.  BUY a breakout and hold of $3400

Alphabet

IMO Google has the strongest chart of the bunch.  Multi-month bull flag consolidation with an impulsive breakout that points to a measured move of $2200. Note the posture of the PPO and RSI indicators. Totally different than the other names. Here we have both indicators rising and no bearish divergence at all.  Strong bullish looks.  Look for a long entry. Any pull back to $1800 to back test the breakout would be a gift that should be bought without hesitation.  That would be the lowest risk long entry possible. Not sure if that is in the cards but be ready if it does.

Netflix

The 13% move this week sparked the advance in the other names.  Price closed above the prior weekly closing high of $550.  I think you look to get long NFLX.  The daily chart will give you granular levels, but for me, long against $560 works. THat is support on the daily and is the top of a multi-month consolidation box.

A Look at the Indexes

SPY Weekly

New Weekly closing highs are bullish not bearish. There’s no PPO bearish divergence but you can see some on the RSI. ( New high in price but at lower RSI readings )  First signs of trouble would be a TL break on RSI, a bear cross on PPO, and most importantly a violation of the price uptrend line in dashed brown. If those occurred, I think you’d be looking a price pulling in to $365 / $360 for starters, then we’d need to re-assess.  Like always, keep rolling and protecting winners and stay long. You can also systematically sell upside calls against common stock and / or long call positions you may have.

QQQ Weekly

We have a ton of market cap reporting this week that will move this needle. We’ve go a nice uptrend working but w/ bearish divergence waving caution flags. We’ve got a beautiful uptrend line on the weekly candles to guide us. Stay long against it. A price trend line break could easily pull us back into $290 to back test the breakout.  Otherwise the trend is up and if megacap tech decides to make a breakout after earnings, we could go into “Ludacris Mode”. Head on a swivel here.

IWM Weekly

Speaking of “Ludacris Mode”  IWM is already there with a sharp overextended and uncorrected advance.  Simple fib retracements are massive with even a 38% fib pull back being $25.  If the reflation / value wobble morphs into stall speed, you’ll see a rug pull in IWM. The  would likely also be seen with a $USD rip and / or TLT rip ( yield drop ). We will be able to fine tune trades off the daily chart, but this weekly is perfect to see just how extended a move IWM has had.  We can go higher and stay over bought so i would not pre-emptively exit longs, wait for a signal.  All time highs are bullish. No natural sellers in blue sky territory. There will need to be a macro shift to knock this trade down.

 

Pulling it all together

For simplicity I am going to bullet point the broad themes for the upcoming week.

  • FOMC on Wednesday.  Be ready for a Tuesday and Wednesday morning slow motion drift higher into Powell at 2pm.  For whatever reason, markets always seem to fade Powell when he starts talking at these pressers at 2.30.  Just an FYI.  And remember, the first knee-jerk move on the FOMC announcement is usually fake.
  • Reflation Trade:  Does last week’s wobble morph into a reversal?   Powell’s comments may be a factor.
    • Timing will be important but I want to be ready to buy the dip in reflation names if we get a nice pull back.
    • Keys for Reflation are $USD and $TLT.  Bullish is when both are falling.  Bearish both are rising.
  • If the reflation names pull back, we should see Mega cap tech rip. 
    • Most of the names are poised for break outs. Others like GOOGL , AAPL, and NFLX already have .
  • Watch for turmoil under the hood. 
    • Watch ARK ETFs and / or ultra high PE high flyers for a stealth rug pull that isnt reflected in the QQQ.
  • Trading high short interest names can be a source of alpha if you are nimble and motivated.
    • Trade with caution and understand monies are 100% at risk.

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