SPY short entry on strength. New Focus List additions CAT, Z, AAPL. TLT setup.
Key Pivot Levels: 196.05: new high resistance, 190: old high support 188.44: 50 day moving average 181.31: recent low
Under the Hood:
SPY did little today. Though it hung around my $196 entry level today for a few minutes, I decided not to take the trade. I am still hoping to see a better price tomorrow.
To keep things fresh, I took the bollinger bands off the chart from yesterday and instead noted the price distance to the 50 dma. Notice what price has done when price stretches too much. We are now more stretched than the previous great short opportunties.
Note that the RSI bearish divergence has disappeared. RSI is also making new highs.
Trading Game Plan:
Short strength Still looking to short above$196.
NOTE: If I short by going long SDS (inverted ultra short ETF) instead of shorting SPY, i will use SPY as my gauge for a stop. There will be no hard stop in SDS. If you can’t monitor SDS, either know where you want your stop to be or short SPY.
For individual stocks, I am looking for stocks that are no extended to go long.
Here we find actionable setups culled from “the watchlist” for the coming trading day.
Note: I have been asked what happens to stocks when they are off the focus list. It does not mean they are no longer good setups. They are just no longer near buy points. They go back to the watchlist unless I say they are removed from the watchlist.
ALNY,WLB and DHI are off the focus list and back on the watchlist as they moved away from buy points today. The rest look ready to pullback.
CAT is at new highs and provides a good entry on weakness. Entry above $107-108.25, stop at $106. Target dependent on entry level, in the $110-112 range.
Z is forming a post breakout trading range. Entry on weakness . Target at the top of the range, above $120-125. Stop at $109.
I went the first 3 weeks without talking about AAPL. That might be a record for me. We all know the stats. There is a big probability of weakness in period following a stock splitting. AAPL is also nearing round number $100 resistance. It also way overbought. Let’s keep an eye on this one for a short opportunity. I may take a couple of stabs as it nears $100. If I get stopped out with a small loss that fine. Gains on a big drop could be big. This is more of a speculative play than most trades. Sometimes it’s fun to gamble a little, as long as you manage risk. Keep in mind that the stock is still bullish overall.
I am still in the process of weeding and adding to the watchlist.
Here are the market leaders not posted in the Focus List. Most have started what looks like the beginning of pullbacks. GMCR gave back almost all gains from Friday. This is not the type of pullback I like to enter.
ETF and Sector Analysis:
I have received a lot of questions about TLT as it is in the buy zone. Yes the setup is still valid and it’s a good setup. I did not enter because a good portion of my account was taken and I wanted room to take a big position in shorting SPY if the opportunity presents itself.
Please remember just because I don’t enter a setup does not mean it’s not a good trade. There are various reasons why I don’t enter, often having nothing to do with the setup.
I took partial profits in GOOGL at the end of the day, moved stop up to entry level and letting the rest ride. Still holding KORS.
Here is the trade journal. I won’t update GOOGL trade until complete exit.