Month: February 2022

 

Heading into the long weekend, we are anticipating Options Expiration (OPEX) on Friday as it could likely add to the selling pressure (or continue the chop fest).

We could see selling ahead as the holiday weekend makes the market even more vulnerable and headline-driven.

For the rest of the week let’s see if the S&P 500 (ES) will continue to sell off or bounce back to its middle range due to OPEX.

There is a big liquidity range sitting above the ES with point of control (POC) at $4,505. This further proves our thesis on liquidity that price will bounce toward POC and if it doesn’t break through liquidity levels, the stock will fail and retreat. 

Pay attention to lows this week. If the ES breaks the range near $4,354, we could see uglier price action selling off toward $4,328.50 to $4,300. 

If the ES holds this range, it could revert to $4,420 and chop, as we’ve seen for most of the week. Note that seeing this choppy action can be a common occurrence during OPEX.

SHOP is a name we’re most excited about as it dropped hard, filled the gap, and is starting to free fall again. If the selloff scenario plays out into Friday, SHOP could hit $630 and continue lower to $600.

Be aware of news updates, watch key ranges, and enjoy the long holiday weekend.

Stay Focused!

 

 

We have a busy week of catalysts that could shape the market with unfortunate international news, the tail end of earnings season, and economic events.

The recent news of Russia possibly set to attack Ukraine on Wednesday has escalated tension in the market and is a very important catalyst to watch. This event – possibly devastating – could cause  a massive move in the market so it’s important to pay attention to the news flow during this sensitive time.

Now that the big technology names are out of the way for this earnings season, we’ll preface the larger names we’re personally watching for reports this week… 

• Tuesday: Roblox, Upstart, and Airbnb
• Wednesday: Shopify, theTradeDesk, and Nvidia
• Thursday: ROKU

For the economic calendar, we’re keeping a close eye on Wednesday for the retail sales report in the morning and the Federal Open Market Committee (FOMC) minutes in the afternoon.

We’re continuing to build off our thesis that as long as the /ES (S&P 500) holds the 200-day simple moving average, we can see how strong the upside potential is. If the /ES trades above the daily mean (21 exponential moving average), that strength is amplified. 

With the many events and reports this week, make sure to stay smart, patient, and recognize the environment for what it is – volatile. Our best advice is to size appropriately to avoid any circumstantial losses.

Since many of our top names have earnings this week and we’re patiently waiting to get through those, we’re mostly focused on trading the overall market. 

Watch the video above for a full analysis of the major indices and overall market volatility. 

Stay Focused!

 

 

In this Sunday video, we’ll review a short position we opened in the Compounding Growth Mastery last week and lay out our plan heading into March and April.

This week we entered an in-the-money (ITM) call credit spread on the IWM (Russel ETF), risking about 5% of our account on this trade to potentially make anywhere from 20% to 25%.

On any bounce next week, we would like to add another 5% of risk to potentially make 30% by March.

This is the type of trade we want to continue taking over and over again.

If we’re in a downtrend for the next few months, we’d love to get into setups just like this where we can risk about 5% of our account to work the numbers in our favor for a higher reward. 

In a bearish structure like we are in with sell signals across the board, we’re best served by shorting the bounces.

Into March and April, we’ll look for bounces in the QQQ (Nasdaq ETF), SPY (S&P 500 ETF) and other names to short and position ourselves to risk 5% of our accounts to make 20% to 30%.

Stay Focused!

 

The markets finished the week in an ugly fashion today, and we continue to think there’s more downside to come heading into March and April.

Our major focus on the short side has been the IWM (Russell ETF), and we initiated the first half of our short position this week on the bounce on Thursday.

 

 

Looking at the weekly chart, we can see that IWM traded sideways for most of 2022. Just recently we have seen the break of support with the move under $210. On the bounce this week, previous support proved to be resistance and we opened our short position, catching a nice dump into the close on Friday.

Our downside target into March and April is $170, and that’s where we’ll aim to take profits over the next handful of weeks. Currently we’re risking 5% of our accounts on a March expiration in-the-money (ITM) call credit spread. We’d like to add another 5% of risk, bringing the total potential return to around 50% to 60%.

The next few weeks shall not be dull, and until things change, our focus will be on getting positioned for the next leg to the downside in IWM and other good looking setups!

Stay Focused!

 

 

The biggest focal point all week was getting through the Consumer Price Index (CPI) report on Thursday morning. The disappointing numbers were revealed and the market reversed hard, with the S&P 500 (ES) dropping to point of control (POC) at $4,505.

This volatility roller coaster swung the ES higher midday and it broke above key moving averages. Following negative news from the Federal Reserve, the market dropped back to the mean at the 21 exponential moving average (EMA), flushed to POC, and drifted below it into the close.

News can accelerate technicals, so pay attention and see if the market sells off into the weekend. This dizzy ride will continue.

We’ll use key ranges to navigate the market moving forward. The POC at $4,505 is a massive line in the sand for the ES. Above POC, the market could see upside potential. However if the ES fails to break through these key ranges, it has a chance to rollover to $4,455 and even to the 200-day simple moving average (SMA) at $4,420.

It’s a whipsaw up-and-down type of market. As long as we are prepared, there’s nothing wrong with these volatile swings. We want to use lower time frames, buy low, and short high. 

The market can change in minutes and even seconds. Stay open minded and be ready to flip the switch at inflection points.

In the video above, We’ll cover the recent action of the Volatility index (VIX) as well as discuss names on our focus list like AFRM, UPST, GOOGL, and more.

Stay Focused!

 

 

The volatility train isn’t stopping yet. 

We have a light week in regards to the economic calendar, with the main event this week being the Consumer Price Index (CPI) on Thursday morning. As traders, we want to be aware of this index because it is a gauge into inflation that could affect the market. 

The structure of the market is starting to shift to the bearish side with tensions rising between Russia and Ukraine. This could lead to more uncertainty and fear in the market, further pushing away from a bullish scenario. Pay attention to the news flow because if any large event does occur, the market could change at any given moment.

One big level we want to focus on this week is the 200-day simple moving average (SMA) on the S&P 500 (ES). It’s a battle between the 200-day SMA and a reversion to the mean, showing the market is changing structure now that the ES is trading below the Ichimoku Cloud. Long story short, it’s going to take a lot of work for the bulls to take control. 

If the ES doesn’t break below the 200-day SMA, we could just stay in choppy territory. 

The ES will need to hit $4,600 to start slowly working its way back to bullish. Until we see things change structurally, we’re trading in a short-the-pop type of market. 

Here is our focused list:

NVDA – On Monday, NVDA held $240 and popped to $251, reverting it to the daily mean. If it keeps holding $240, it could revert to the mean again and head to $260. Point of control (POC) at $243 could be a good spot to buy. If NVDA gives up its strength and breaks below $240, we could expect a move to $230. 

SHOP — If SHOP holds and breaks above POC at $883, look for it to break through $915 and revert to the mean near $1,000. If SHOP rejects $883, it could drop to $800, $780, and potentially fill the gap to $745. 

GOOGL – Announced the stock split last week and has been selling off for a healthy pullback. Be patient with GOOGL. If it can trade through its 50 daily SMA near $2,820, it could push to POC near $2,866. Below POC, look for a move to $2,700.  

Stay Focused!

 

 

As a new week approaches, we’re seeing a lot of bearish structure, trend, and momentum. 

Earnings last week from companies like AMZN, FB, and GOOGL affected the major indexes and overall market. These big technology names failed to keep the market out of bearish territory. Until the structure in the indexes change and move bullish, like trading back above the daily and weekly moving averages, our thought is that the path of least resistance is to the downside.

Any bounces to come will simply be short opportunities.

Areas that we would not look to short are spots like energy, XLE, and XLP. Structurally these names are bullish according to our checklist criteria like positively stacked EMAs and green 10x bars.

Stick to the checklist. Look for bullish exposure in a potentially bearish market.

In today’s video, we’ll lay out names that are showing bullish strength and structure to position ourselves properly in this wild market.

Stay Focused!

 

It was a week of big earnings announcements in the markets with technology giants like GOOGL, FB, and AMZN reporting quarterly results. Safe to say, it was not dull.

We saw FB sink by more than 25% the morning after the Q4 announcement, while both GOOGL and AMZN exploded to the upside. With such strength in a heavily-weighted name like AMZN, one would think the indexes would react positively, but that wasn’t quite the case.

Outside of a select few spots in the market, most names are looking increasingly bearish as structure continues to break across major time frames. As kids, some of you may have played a game called “follow the leader.” In the current market that mindset is going to be important, as we are no longer in an environment where everything has the wind of the market at its back.

Examples of leadership in this market are energy and oil stocks, such as XLE, XOP, LNG, EOG, DVN, and many others. Unlike technology, semiconductors, and most other sectors, energy has a bullish trend, structure, and momentum (the BIG 3). So long as that’s the case, this will be one of the few spots we are looking to add bullish trades, while patiently waiting for better short entries on the indexes.

This week we were able to nail a nice move during the Compounding Growth Mastery session in DVN. This energy stock fired a handful of lower time frame squeezes for a solid move into our target of $56. Though a short-lived trade, it was good for a quick 45%+ return on risk. A nice trade, but we’re looking for more leaders like this one.

Heading into next week, so long as the bullish structure remains intact, we’ll be looking to buy dips on DVN, EOG, and a few other energy/oil names. Another interesting spot right now is XLP (consumer staples) which is home to solid setups in PG, KO, and PEP.

 

 

 

 

 

When you compare the current market to the environment we saw for most of 2020 into 2021, following the leaders – wherever they may be – is crucial to your success. No longer is the path of least resistance to the upside for the entire market, so our focus must shift to the select spots still showing bullish structure and momentum.

Follow the money, follow the leaders, and there are profits to take home consistently even in this wild market.

Stay Focused!