We continue to watch 3 SPY levels. IWM line in the sand. Focus list new additions GWPH and CODE. AAPL analysis. Today’s entry DUG already near stop out.
Key SPY Pivot Levels: 198.20 : new high resistance, 196.25 20 dma, 192.61: 50 dma
Under the Hood and Trading Game Plan:
Not much constructive today, as SPY hangs out just under the old high. Everything we have talked about is still there. We continue to watch three key levels. I currently have a slight bias to the down side for a minor pullback, possibly to the 50 dma. However, it’s not big enough that I am going to make any big bets or get heavily short. Currently I only have 1 short position and two longs.
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.
Let’s take a quick look at IWM. It continues to lag SPY. A strong break of $114 will likely lead to a drop down to $110. I’ve though about taking an “anticipatory” short trade here. However, I still see a decent probability of a bounce to $117, so for now it’s off the table.
I am still holding AAPL short, EZCH long and TSLA long.
I entered DUG today (you should have received an alert). It is sitting right at my stop level of $36.75. I have taken such a small position size that I am going to give it another 2o cents to see how it handles the open tomorrow. There is no wiggle room here. If my mental stop is hit, I am out.
Note: If you are watching the screen on thinly traded equities like DUG, try to use a mental stop. If a lot of people have hard stops in place, there will be “stop gunning” that take the stops out. If you are away, keep a hard stop in place. This is only for those who can watch.
Also remember while ETFs like DUG and DIG are supposed to trade with an underlying asset class, supply and demand does come into play. That is why we don’t always see the exact opposite movements in DIG or DUG, and why levereged ETFs don’t always move exactly 2X or 3X the underlying equity.
I have received a lot of questions about AAPL since taking on my short position. I did not realize this trade would be so controversial. Yes the stock did break out to new highs, which is bullish. Overall I am bullish on the stock as well. I am playing a pullback here as a short based on the negative divergence setup. If we look at RSI at the old high and compare it to new highs, the new high RSI is lower. This creates a divergence. The classic setup is to wait for a violation of the old high. I like to enter early in anticipation and take a small loss if I am wrong, but that is not the classic way to play the negative divergence. Today we got a slight violation of the old high. If tomorrow follows through, the setup will be in effect. Those who haven’t entered can enter if there is weakness tomorrow.
The Trade Journal is updated with all open and closed positions.
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.
BKS, MATX and EZCH are the best setups near buy points. AMZN and WLB need to pullback. CTRN and IPXL are taking deeper pullback that are a concern. The 50 dma is in play for both. CLR is off the focus list as a short as it bounced strong after the breakdow.
CODE broke out to highs today. Entry on weakness above $22. Stop under 20 dma.
GWPH has pulled back to strong support. I like it on weakness in the $80.50-82 .50 range, with an intitial target at $92. Stop under the moving average.
All of the stocks in the shorts category below are in the midst of forming nice setups. I am watching them closely.
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
These are stocks that I always watch, though they might not be in my tradeable watchlist, nor are they actually always leading the market.
CAT broke to new highs. It’s the type of boring leader that is doing well right now. GS, GOOGL and FB continue right at recent high pivots. The 50 dma is cming into play for GMCR.
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.
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