For the first time in weeks, the major market indices had positive news to rally on.
While the CPI number came in at 9.1% last week for June, many took at as a potential sign that inflation has peaked for now since oil and other commodities had fallen significantly from their prices in June. The number was not accurately reflecting the current prices of commodities in July.
To help you understand how Kunal day trades in these market conditions, we will do trade recaps rounding up some of the best and worst trades of the week so you can understand his thought process and stock selection!
Let’s start by analyzing the $QQQ, what it did last week, and what to expect from it this week:
$QQQ
It was a strange week with the market gapping down for two days in a row and getting bought up. We are still inside a range, but with all the positive news last week a multi-week bear market rally could be on the cards. Watch the $296 area this week carefully, if we can hold over that level tech stocks and should see a nice rally.
If you don’t know what the $QQQ is, it is an ETF that tracks the NASDAQ 100 Index, which in layman’s terms it follows technology stocks.
Here are a few of Kunal’s trades from the week, and some key lessons you can learn from them:
$OXY & $BABA Shorts
$OXY was the classic opening range breakdown set up. With oil getting crushed last week, $OXY was the ideal trading vehicle to short to get in on the downside momentum. He got short at $57.35 in the morning at around 9:50AM, covered half into the flush at $56.87, and covered more into the flush into the low $56s.
$BABA
$BABA had a similar setup at the open, but didn’t follow through as well. Kunal took profits quickly because $BABA was still uptrending on it’s daily chart, and you don’t want to marry shorts when you’re going counter the bigger picture trend of the stock. He got short at $108 at around 9:45AM, covered half at $107.8, and covered the rest into the flush into $107.
He also tried the $PDD short, expecting weakness in other China stocks with $BABA rolling over, but it didn’t follow through so he took the small loss on it.
$NVDA
With semi-conductors often being a market leader when the market shows strength, Kunal made several trades on Nvidia to the long side to capitalize. He made this trade after the market rallied on Wednesday and we had the gap-down reversal.
This was actually a mid-day trade, where he got long after it reversed off the market open. $NVDA is a very high beta stock, meaning it closely follows the overall market. At this time the $QQQ and $SPY had a major reversal after a gap-down, and trapped many short sellers. Kunal got long at $151.27, sold half at $152.07, and then sold the rest in the high $152s. This is the type of trend that You will get in and out of, and reenter once it sets up again. Kunal made many other trades like these on semi-conductors and other momentum stocks to take advantage of the squeeze.
Biggest Lessons From the Week
Focus on TRENDING sectors. Be in the stocks in these sectors that have the best range and liquidity to capitalize on the momentum. Don’t get stuck in the chop. Let the indices guide your bias for the trading day. Earnings season is around the corner, and it will hopefully bring in some strong news plays that will bring in expanded ranges and trends!
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