Weekend Profit Navigator Oct 11

Tickers discussed: SPY / QQQ / IWM / EURUSD / USD / GLD / SLV / GDX / STLD / UBER / TEAM / BURL / GIII / KWEB / Market Internals /  Strategy update

The Weekend Profit Navigator provides a big picture stock market 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 Season Kicks Off this Week

Big banks begin reporting this week. The recent bump in yields have helped the sector’s stock prices but came too late to help this quarter’s financial results.  What will be key for the group is loan loss provisions and forward guidance. Watch and listen closely.

Sentiment

At least by this measure, sentiment is more or less neutral.

Companion Video

The companion video provides additional commentary to the charts and set ups shown below.

The US Dollar Falls apart

The short squeeze in the $USD that I had been anticipating did not materialize as a resurgent Euro made it’s presence felt and consequently the $USD was rejected at downtrend resistance on the weekly chart shown in the second panel.  This has positive ramifications for gold, silver, and the commodities complex more broadly discussed in the next section.

Precious Metals and Miners Flash a Buy

With the USD resuming its downtrend, that should be a tailwind for precious metals and miners. As you can see below, price is emerging above overhead resistance levels offering objective, low-risk entries for GLD / SLV and GDX.  It wont be smooth sailing as all have new levels of overhead resistance to chew through, but with a tight objective entry, that should not pose any great concern. What would really help all 3 get going is to see PPO momentum break back above the zero line signaling positive momentum taking charge.  I like all 3 long heading into the week.

Gold

Silver

Gold Miners

Broad Markets Surge

The important sectors have a big breadth thrust.

Arthur Hill from Stockcharts.com provides this chart that shows the 10 day ema of the advance-decline percent for the top 6 sectors by market cap. It shows 5 of the 6 having strong breadth thrusts exceeding 30. It shows strong participation across the big sectors with only XLC lacking a bit as $FB and $GOOGL which are 44% of XLC didn’t have big weeks. This broad participation bodes well for a broad market advance with legs.

A Triple Breakout for the Indexes

SPY Weekly

The interesting factoid on the weekly chart is the bull kiss of the PPO. Its where the PPO looks to make a bear cross, but then reverses and “kisses” the signal line and turns up. It turns a bearish set up into a bullish one. Also notice the RSI never went below 50 keeping it in its bullish regime.

SPY Daily

RSI moved from bearish to bullish above 50 as PPO did the same, breaking above the zero line. Price finally broke above the $20 trading range of the past  month. The breakout gives up a projected $20 move and points to a technical target of $360. For trading purposes, traders can use the breakout level of $340-$342 as a zone of support and a level to shoot against on the long side. If price were to drop back below $340, it would be quite bearish with the target becoming $320.  Bottom line: SPY is bullish and is favored to make a run at the old highs but with added volatility with VIX remaining at elevated levels. . 

QQQ Weekly

Even though RSI had a trendline break and PPO put in a high level bear cross, those signals, at least for now, look like whipsaw / false signals. Price found support after a tag of $260 as has put in 3 consecutive higher weeks. A confirmation of the false move would come when PPO executes a bull cross.  Confirmation would also come on a breakout to new highs in price.

QQQ Daily

Like SPY, Price broke above it’s $20 trading range and thus a measured move $20 higher to $300 is favored. RSI and PPO have broken into their bullish regimes above the mid-point of their ranges. Traders can use $280 to shoot against on the long side and look for higher prices. The chart should remain bullish as long as price stays above $280

IWM Weekly

For IWM the vast majority of time over  the past 3 years, price has spent time toggling between $140 – 157.50. Now price has made a push towards the double top highs at $167.50. If the rotation into value and cyclicals has staying power, you’d expect and want to see this weekly chart break above $167.50 to blue sky territory.  If price is able to do that, longer term swing traders can get long against the well-defined $167.50.  Once in blue skies, there will be an opportunity for an “IWM catchup” trade as more money piles into the beaten down sectors.

IWM Daily

Small caps had a stellar week and outperformed the other indexes as the value / cyclical trade picked up steam. Traders can use $160 as a line to shoot against on the long side. THe real test of this index and the value / cyclical trade is how price handles long-standing resistance at $167.50.  A breakout there would move price to blue sky territory. If that happens, traders can move stops / strikes higher to $167.50.  The chart is bullish. Only a move back below $160 would change the picture to bearish.  Bottom Line:  Bullish / stay long

Trade Ideas and Set ups

$STLD – Steel Dynamics

Steel as a group popped up on one of my improving relative strength scans. Going through the charts, STLD is approaching a key spot on the weekly chart. If price can break above $34 price will move into a relative price void where I see resistance diminishing until $40-$41.  Alarm $34. A weekly close above $34 triggers the entry. T1=$38  T2 = $41

KWEB – China Internet ETF breaking out

Price is emerging from a $8 trading range and is supported by a bull cross on PPO and an RSI breakout. The fulfillment of the measured move points to $80 as a target.  THis is a great way to play earnings to capture BABA, JD, BIDU  and other names through earnings season without single stock risk.  I like this long against $71

BURL –  Burlington. Poised for a run

Apparel has been a strong group lately. As long as price can hold $218-$220, the door is open for a run to the old highs at $250.

GIII – G III Apparel.  Big Void above

G III has a similar set up to BURL with a cup n handle working against resistance. If price can pop resistance and the 200ema at $16, then price moves into a massive volume / price void with nearly an unobstructed path back toward $27. I like this long above $16.

TEAM – Atlassian Software

TEAM has been chopping within a wide $35 price range all Summer but is not looking for a breakout. A break and hold above $200 opens the door to a move toward $200-$235. Alarm that level to get long on a breakout and set your stop just below.

$UBER – UBER Technologies;  Go Time

I’ve seen a lot of institutional Order flow suggesting that the big boys want / think this is going higher.  A pop above $38 with a hold is the signal to get long. Alarm it and be ready.

Pulling it all together

Technicals flash the Green Light with Triple Breakout

Triple Breakout & Implications

  • SPY, QQQ and IWM have ALL broken out above their wide trading ranges that they’ve been in for weeks.
    • That makes me more confident in adding long exposure.
  • We have well-defined, objective levels we can now shoot against. ( SPY $342 / QQQ $180 / IWM $160 )
  • Small cap and value names are not only participating, but leading.
    • This has broadened out the rally and has kept the advance – decline readings healthy
  • Calendar Seasonality
    • Although we’ve certainly had Q4 nightmares in the past, Q4 has been generally bullish.
    • Once the election risk subsides, I think we can look forward to some Vol being drained from the system, which would be bullish.
  • The Lead in to Earnings Season is usually bullish
    • We will do our best to catch some of these runners in our swing trading
    • Once earnings unfold, there will be plenty of GAPS for us to work with Bracket Trades.
    • There’s an ETF for that.
      • ETF’s are great vehicles to trade during earnings season, especially if you have a fundamental view on a sector / sub-sector.
      • ETF’s eliminate the single stock risk
      • For example, if you’re bullish on regional Banks, you can sit in $KRE as earnings unfold.
      • For those who are not yet comfortable with options, there are lots of 2x – 3x ETF’s that will get you some added leverage if desired.

FATMAAN turns soggy 

  • The price action in mega-cap tech has been soggy ever since they pulled the rug in early September.
  • We may be entering ( or already are ) in a period of under-performance as money flows toward beaten down cyclicals and value.
    • This mostly applies to FB / AAPL / AMZN / and MSFT.   NFLX and TSLA  still have bids and price action has been more constructive.
  • Implications: 
    • Let’s find sectors and stocks that are working rather than continuing to stare at these names through dormancy.
    • Being flat is one thing; going down is another.  If we see another wave of  Bear Raids in these names, it will pull indexes down and would likely shift market sentiment

Pulling it all together

  • Price has confirmed it wants to go higher; we have great lines to shoot against.
  • Add long exposure in a managed, reasonable way
  • Market risks remain.  Elevated VIX, Headlines, Tweets, Election are all still out there.

 

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