We saw the S&P 500 (SPY) rally into its daily 21 exponential moving average (EMA) at $390. We also saw heavily-weighted names like AMZN, GOOGL, and TSLA begin to rebuild the structure of their charts. This points toward the potential for more upside.
As far as the TSLA setup goes, this is one of our favorite picks for a rip into higher prices next week. TSLA was one of the first setups where the Big 3 bars went neutral across all time frames. This is an indication that the selling pressure is coming to an end.
At the close on Friday, TSLA traded above the daily 21 EMA with squeezes on the daily, 4-hour, and 15-minute time frames. In addition to these squeezes, TSLA also has green Big 3 bars (our buy signal) on the 30-minute and 15-minute charts.
Keep in mind, individual stocks will move with the market.
In the event SPY fails to trade above $390, it’s unlikely stocks like TSLA will trade higher.
However, if the bulls can run the market higher, we’re looking for leadership in the setups printing our buy signals.
Our target for TSLA is a push into $790 to $800. We’ll be covering a more of the setups on our watch list in the Sunday newsletter video.
Let’s break down how I use my two favorite internals to better understand what moves the market.
We’ll combine how to understand $ADD and $TICK with the overall market to get a better sense, gauge, and feel when you are trading the major indexes. Understanding market internals can be especially helpful in identifying trends and choosing more precise entries and exits.
You must include the dollar sign ($) before the ticker name when entering the tickers into your trading platform.
$ADD: Advanced Decline Line
$ADD shows whether most stocks are trading or advancing above (or below) their prior close. This gives us a sense of what the overall market is doing.
Here’s how one reads $ADD on a chart:
Above zero (positive): Most stocks are up for the day, green day
Below zero (negative): Most stocks are moving lower for the day, red day
$ADD
In the image above, when $ADD was steadily trading sideways above zero (in the bottom left-hand corner), the S&P 500 (/ES) was also chopping to the side with a slightly green day.
When thinking about $ADD, we like to think of it as the steering wheel of a car pointing us in specific directions.
$TICK:
$TICK shows how fast things are getting bought and sold. Consider $TICK as the gas pedal for our car metaphor, representing how quickly price is moving.
There are certain levels and zones that we like to focus on for $TICK:
Zero: When the market is chopping sideways
Upper zones: $600 to $1000
Lower zones: -$600 to -$1000
When $TICK starts to reach the upper threshold from $600 to $1000, this indicates extreme popping or buying. If $TICK stays in this upper range, price will likely explode. Think of this as pushing on the throttle and sending the car forward (or, in this case, pushing price higher).
On the flip side, when $TICK hits the lower zone, extreme selling is happening. We can think of this as pushing on the car brakes.
$TICK
When we put the two internals together, we can ultimately get a confirmation of the move ($ADD) and then see how fast the move will unfold ($TICK).
Case Study: 2/10/2022
In the video below, we’ll walk through both $ADD and $TICK. We’ll go through what I look for and how I use the internals to gauge the overall market using an example from Thursday, February 10, 2022.
We hope you’ve enjoyed this introduction to using $ADD and $TICK to get a better edge in trading. Understanding how to use these internals can be especially useful in defining trends in the market and understanding when exactly to enter and exit your trading positions.
Especially in volatile conditions, we can use these tools to better understand what’s happening in the market and take advantage of big moves.
Due to the Juneteenth holiday, the market is closed on Monday, June 20th so we have a short holiday week ahead.
Energy (XLE) has been one of the strongest trends in the market this year. We’ve been buying every dip until now.
Last week, energy (XLE) and natural gas (UNG) lost their buy signals and bullish structure. We saw energy, natural gas, and names like VLO and OXY print sell signals and show steep percent declines.
When it comes to buying the dip or playing the trend, focus on structure.
In the video above, we’ll review the structure change in energy names. We’ll also review one of our favorite setups printing bullish big 3 bars with a daily squeeze across multiple time frames.
The last 3 to 4 months, we’ve highlighted the energy (XLE) and natural gas (UNG) trends as the best buy-the-dip opportunities in the market. And, for the last 3 to 4 months, that game plan has served us incredibly well.
However, it’s looking like those bullish trends stop here (for now).
We work our “buy-the-dip game plan” when (and only when) our bullish signals are present.
As of Monday, the energy and natural gas charts stopped printing our bullish signals. This was our first heads up that things might begin to break down.
XLE Daily Chart
Our buy signals are based on our bullish trend, structure, and momentum criteria. The signal gets printed (green bars) when at least 6 out of our 7 criteria are met. In order to get the daily buy signal, the weekly chart must also meet our criteria.
So long as we have the buy signal, we look to get long. As soon as the signal is cancelled, it’s time to get cautious.
Since losing our daily buy signals, here’s how much the recent leaders have fallen over the last 3 to 4 days:
XLE: -14%
OXY: -9%
VLO: -18%
MPC: -17%
See how quickly things can change?
This is why as traders, we need to know when to move on to new trends and setups. Far too often, traders don’t know when it’s time to stop buying the dip. This can result to giving back all the profits made when the trend was actually in tact. That’s a big “no-no”, and giving back profits like that should be avoided like the plague.
We thank these trends for their service over the last few months, but for now we’ll be avoiding getting long energy and natural gas until our signals show up again.
In Sunday’s video, we’ll dive deeper and look at these signals across the markets.
It’s been a bloody week, with the major indexes dropping lower on Thursday.
It has been a week full of catalysts with SPX roll, rebalancing, the Federal Open Market Committee (FOMC), and triple witching. Be mindful of these events, especially triple witching (which ends on Friday), as this can lead to more chop.
The S&P 500 (/ES) gapped down from the upper zone at $3,807 to $3,855 on Thursday. It dropped broke inside of a key zone to create a new low at $3,642.
The /ES may continue to chop in this lower range from $3,656 to $3,720. If it breaks below this zone, look for it to hit our target at $3,596.
Keep in mind the market is closed on Monday, June 20th. Pay attention to the price action as big money does take this into consideration.
In the video above, we’ll review the key zones of the major indexes for Friday and setups on our focused list, including ROKU, SHOP, and AAPL.
The week started off on Monday with the market gapping down and printing red names across the board.
There are a number of stacked catalysts to watch out for this week.
The SPX index rollover continues this week. This is when big money sells and rolls into their further-out quarterly expiration contracts. So far, this has caused big moves to the downside.
We also have a large option expiration event called triple quad witching. Look for options to expire and for premiums to be affected by this.
As we head into a new quarter, we also have S&P rebalancing. This involves big funds and firms needing to rebalance their portfolios and follow rules that allow them a certain number of stocks and sectors.
To top it off, the Federal Open Market Committee (FOMC) statement addressing the interest rates decision will be released in the afternoon on Wednesday, June 15. This will be followed up with a statement by Federal Reserve Chairman Jerome Powell.
The S&P 500 (/ES) sold off at the end of last week to $3,900. This week started with a major gap down to the previous low of the year at $3,807.
Be mindful of the key zone from $3,807 to $3,855 as this will be our compass for the next market pop or drop.
Above this zone, the market could seek liquidity toward $3,900 to $3,930.
If the /ES doesn’t break above $3,807, we could see chop or a flush lower potentially to $3,656.
Here is our focused list:
NVDA — NVDA is trading near two major key levels at $155.67 and $152. If NVDA holds this $152 to $155 zone, focus on a pop above the trendline structure at $162. Through $162, look for NVDA to hit $167 and fill the gap to $168. If NVDA can’t break through $162, we could see chop or a drop toward the $155 to $152 zone. Below this, we’ll look for it to hit $148 to $142.
SHOP — SHOP is nearing major levels from $308 to $305. SHOP could pop from $305 to the $334 to $340 zone and fail. If SHOP can get through this zone, then $350 to $360 is possible. If SHOP fails to break through $322 and fails at $305, look for it to hit $282 and then potentially buy the dip.
AAPL — We’re using AAPL as a major compass for the market. If AAPL holds $132, it could fill the gap to $137. Through $137, we have $141 as the next target. If AAPL breaks $132, be aware of potential chop or a drop to $129.
ROKU — Employees started a rumor last week that Roku might join Netflix. On Monday, ROKU closed below the key level at $75. If ROKU breaks above $75, it could work its way toward $80 and then the $83 to $85 zone. If ROKU fails at $75, we could see a drop to $67.
Next week will be anything from dull as we have a big options expiration on Friday, June 17th. There are a record number of options set to expire that could lead to high volatility.
The market gapped down on Friday, and the S&P 500 (/ES) flushed to $3,900. Heading into next week, we’ll look to short any bounces.
In the video above, we’ll list names on our bearish watchlist like SPX, DKS, and ABNB and review bullish setups on energy (XLE) and natural gas (UNG).
After a 9-day consolidation, the markets finally broke out of the range on Thursday with a big flush to the downside.
SPX Daily Chart
After testing support near the recent lows on Friday, the big question next week is whether or not the market bounces off support or if support breaks for a further flush to the downside.
Keep in mind that next Friday, June 17th is a big options expiration. There are a record amount of expirations set to expire Friday afternoon.
Any time we head into a big expiration event, there is potential for wild back-and-forth action. With this volatility comes the opportunity for great day trades.
Be prepared to focus on lower time frame setups early next week. Volatility and the daily expiration on S&P 500 (SPX) options can make for great daily “income” trades.
On the swing side, we need to see how next week unfolds into Friday’s expiration to understand the next direction better.
As long as the indices are trading under the daily 21 exponential moving average (EMA), our primary focus will be on shorting any bounce in the downtrends. For bullish setups, we still like XLE, OXY, UNG, and a few others that we’ll cover in the Sunday video.
Markets like these are far from dull. While they aren’t “easy,” they still offer opportunities if we focus on the right things. Shorting bounces in bearish structure (red Big 3 bars) and buying the dips in bullish structure (green Big 3 bars) is a strategy that has withstood the test of time. That will continue to be our focus in this wild market. We’ll look for clean setups using our Big 3 indicator on Monday in the Compounding Growth Mastery together.
The next major catalyst we’re focusing on is the Consumer Price Index (CPI) report released at 8:30 a.m. Eastern on Friday. Pay attention to this report as it gives insight into inflation and how much consumers are spending.
The market rolled over on Thursday ahead of the CPI report. We’ll see if this report pops the market back into its range or drops it further.
Depending on what happens with the CPI report, we’ll wait for the Federal Open Market Committee (FOMC) statement by Federal Chairman Jerome Powell at 2:00 p.m. Eastern on Wednesday, June 15th.
We’re continuing to focus on the structure of the S&P 500 (/ES) daily chart to the downside.
On Thursday, the /ES hit this structure and broke through major inflection points. The /ES dropped to close the day on the point of control (POC) at $4,013.50 and below the 4-hour Ichimoku Cloud.
In the video above, we’ll break down where the market could further break out of its range, define key levels on the major indexes and Volatility Index (VIX), and review our focused list setups on SHOP and AAPL.
After a short week last week, our focus is on structure.
The S&P 500 (/ES) is trading below its trendline structure, which leads us to lean more bearish. On Monday, the /ES gapped up and failed to key levels.
The major catalyst this week is the Consumer Price Index (CPI) report released on Friday. We’ll follow up in the Thursday newsletter to hone in on how this inflation report can affect price action.
We’re also watching two specific events on SHOP and AMD.
On Tuesday, the SHOP 10:1 stock split voting will occur. On Wednesday, AMD has a financial analyst day, which could impact price.
In the video above, we’ll review the new liquidity levels on /ES, lay out key zones and structures, and walk through our favorite setups that we’re keeping an eye on.
Here is our focused list:
SHOP — There is a large flag forming. Be patient for the stock split news as this will be a large catalyst, up or down. If SHOP works its way up to $383 and the daily 21 EMA, this could be a short opportunity. If SHOP moves through $383, we can look for it to move to the trendline structure. The same goes for the downside. If SHOP breaks $383 and moves lower, we can look for it to break to the trendline and either pop back or drop lower.
AMZN — This is the first week since the 20:1 stock split. Practice patience and observe the options premium. AMZN has a big gap to fill from $130 to $140. If AMZN continues to fail at its key zone and reverses, we’ll look for a short to the $121 range with the daily mean near $118.
AAPL — If AAPL pops toward $148 and above the daily mean, we could look to short it. Note that POC is at $145.44. If AAPL fails and drops, see if it breaks structure and heads toward the $140 range. If AAPL holds POC, AAPL could pop to $152 to $154.
