Quick Summary:
SPY hap on weak volume. Focus list additions KS (short) and TSLA. Brazil ETF in play on breakout. Use EWZ or BRZU. AMZN and GOOGL near resistance. Watch for breakout.
The Market
Key SPY Pivot Levels: 198.20 : new high resistance, 196.05 20 dma, 192.41: 50 dma
Under the Hood and Trading Game Plan:
Please read this Report from last week if you have not already, along with the update with stocks. It still important and still very much applies.
Let’s zoom in on SPY more than we usually do, taking a 1 month view of the chart. We are still mainly interested in the high pivot, the 20 dma and the 50 dma. Today we gapped up on low volume, and the gap held. See the cap level on the chart. Low volume gaps tend to fill rather quickly. Due to this gap and the higher than average probability of it filling, I am not going to get aggressive with longs until the gap fills, or we break the old high.
The overall game plan is to remain cautious. I won’t be making any aggressive plays until I see some real clues. Until that time, I will reduce position size and take some stabs, both long and short.
Current Trades
I am still holding AAPL short.
Here is the Trade Journal. It is updated with everything but the current open AAPL short.
The Focus List
Last week we talked about having a few stocks in five different categories to key on, but no real entry level focus list stocks. With the pullback and many stocks pulling back to key support, or breakouts that have pulled back, I am going to include the regular focus list this week.
Five of seven stocks in the focus list are right at or near buy levels: BKS, CTRN, EZCH, WLT and IPXL. I decided to pass after seeing the market gap up weakly. AMZN continued with the breakout and is not currently near entry level. WLB also needs a deep pullback.
New Additions:
KS is setting up as a short. After a huge breakdown, it has pulled back up to the 50 dma (breakdown-pullback setup). The condern here is that there are two big breakdown days and the stock may pull up a little higher. Entry under $30. Stop $30.50-31. Target $26-27.
Market leader TSLA bounced strong right up to the 20 dma, after building a trading range above the 50 dma. This stock has a wide range and stops and entries are also loose. Entry in the $218-223 range. Stop at $214. Initial target $240. If you enter at the high end of this range, and stop is at $214, you must use $240 as your target to get 2:1 reward to risk.
Here are the categories we started watching during last week’s pullback. Click on stocks for charts.
1) get extremely oversold and near major support for bounces (rubber band setup) I am not just looking for oversold readings here, I am looking for extremes. We are not there yet on most of these. There needs to be more selling, price nearing important support levels, and extreme readings. At that point we increase the probability of a bounce. If SPY can pullback to the 50 dma (see chart below), a bunch of these will setup. GWPH, IPXL, KS, EZCH, Z, TWTR, YY, Z, TSLA
2) stocks and sectors that are holding up well (possible rotation or new leaders) Energy, metals, gold, silver, apparel BKS, FANG, PTRY, BWLD, CTRN, TAP, CODE, GMCR, X, FCX, XOM, COP, CZRO, NOV, CLR, AA, MATX
3) stocks that reverse off big down days intraday (hammers) UAL, LUV, JBLU
4) Select shorts AAPL, AKAM, KS, SDRL, GRMN, MSM, SDRL (GOOGL removed)
5) Pullback shorts (bounce to resistance after big drop–often was a rubber band trade) We need to wait and see for this list. Many will come from the stocks that bounce after extreme drops. Big Drop – – -> bounce – – -> short setup if bounce on weak volume and price action
Market Leaders
These are stocks that I always watch, though they might not be in my tradeable watchlist, nor are they actually always leading the market.
FB and GOOGL gapped right up to resistance. Let’s see how they handle it.
ETF/Sector Analysis
EWZ (Brazil) broke out on strong volume to highs. I like it on slight weakness, with a stop under $49. If looking for added volatility, use BRZU (3X leverage). It was up 6.3% today, versus 2% for EWZ. Remember it also goes down faster.
Please read the post 23 Laws of the Part Time Swing Trading the Market Speculator Way. It is important to know these rules if you trade off the Report.
New subscribers and trial members please leave me any feedback/comments in the comments, via email (singhjd1@aol.com) or twitter (twitter.com/PaulJSingh).
