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The market is heatin’ up to start the week! We’re seeing the exact scenario we’ve been preparing for with the market plummeting to the downside. We want to keep our focus on two major indicators: the 50 simple moving average (SMA) and the Daily Ichimoku Cloud.

In the last year we’ve noticed a common “if, then” rule with these two indicators… 

If we don’t hold the 50 SMA, then we drop to the Daily Ichimoku Cloud. 

On Monday, we saw exactly what we expected with the S&P 500 (ES) dropping below the 50 SMA and breaching the Daily Ichimoku Cloud. The market could see more trouble moving forward… 

If the ES trades below the Daily Ichimoku Cloud for the first time this year, we might see its first bearish trend of 2021. 

Rather than try and predict which way the market will go, our job as traders is to read and react based on the information we’re given in the market. 

Here is our focused list:

GOOGL — Strongest technology name that started to trend down last week. Watching $2,767 as a key level. If it holds the $2,767 and 50 SMA zone, GOOGL has a strong chance for a reversion to the mean for a dip buy. Looking for a gap fill back to the upside. 

ROKU — Relatively strong name holding itself up in the market. Setting up with a tight wedge to the downside. See if ROKU can hold its low from last week at $309 at the bottom of the 4-hour squeeze. If the market works its way higher, ROKU could see a push up for a strong potential long entry. Daily mean is at $340, so look for a push to around $330 to $340. 

NVDA — Strong name that is vulnerable to drop, Key level at $208.75 around the 50 SMA, Would love to short NVDA down to the 50 SMA. If we hold the 50 SMA, we could see a gap fill. If we break the 50 SMA below $208.75, look for a drop to $200. If the market keeps dumping, we could even see NVDA drop to $180. 

FB — Could be an awesome dip buy now that it is back at the Daily Ichimoku Cloud on its final leg of support around $352. If the market pops, FB could rally to the 50 SMA with a reversion to the mean. If it goes below, FB could head down to $330. 

Stay Focused!

 

 

As we start to build our watchlist for the week, we need to be aware that there are times in the market to be more active and times to simply ‘sit on your hands’. There are multiple names presenting good-looking setups but they all have one thing in common… 

Volatility continues to grind higher. 

In the Nasdaq (QQQ) for example, we have a brand new daily squeeze, with names in the technology sector like GOOGL and MSFT also presenting daily squeezes. While these setups are showing structure and trend, we’re waiting patiently to buy the dip.

Because volatility is high, the market does not have a strong conviction to the upside. For the last few months, we’ve seen the market flush and turn back around to all-time highs. Every time the market turned to the upside, volatility flushed. 

For that reason, we will ‘sit on our hands’ and wait for volatility to drop until we look to buy the dip and enter high-probability setups. Look for structure and trend for valid setups and wait for the volatility index to die down before confirming and entering your long position.

Stay Focused!

 

 

In a market that has spent the last one to two years breeding a ‘buy the dip’ mentality, it is important to have a set of rules to follow before blindly jumping into the upside. 

One of our biggest rules when it comes to buying the dip is that we will not do so without a reversal to the downside in volatility.

Looking at the trend in the S&P 500 (ES) over the last few months (chart below), we have seen a series of flushes to the downside in May, June, July, August, and once again in September. In previous months, each of those flushes were met with a reversal and a rip back towards new all-time highs (ATH). 

 

 

Visually, buying every dip in this incredibly bullish market makes a lot of sense. What you must understand is the relationship between that reversal to the upside in the indexes with the volatility index (VIX).

Before each and every one of those moves to the upside unfolded, they were triggered with VIX ‘throwing in the towel’. 

 

 

In the current market, VIX has continued to grind higher. For this reason we suggest practicing patience here and avoiding getting long until these conditions improve. If there is ever going to be a dip that doesn’t bounce, it will be in the face of increasing volatility.

Until VIX dies down, we won’t be putting cash to work. There are a handful of good-looking setups in names like GOOGL, NVDA, TSLA, and MSFT here, but none of that matters to us in these conditions. Trading is a game of probabilities, and the following probabilities are forcing us to be patient here:

• If VIX continues to spike, the indexes will likely continue to trade lower.
• If the indexes continue to trade lower, then everything likely gets dragged lower with it.

Your best swing trading will take place when the overall market is providing ‘wind at your back’, and at the moment that is not the case. In the Compounding Growth Mastery, we are able to close profits in AAPL, NOW, GS, FB, IYR, XLC, and TSLA as a result of the wind at our backs. Until the conditions are supportive of the same environment, we will be sitting on our hands! 

Next week is setting up to be an interesting one, so make sure to join us for our premarket prep on the Focused Trades YouTube on Monday, Wednesday, and Friday!

Stay Focused!

 

 

Coming into this week, we’re continuing to focus on the upcoming events in the overall market on Friday, Sept. 17: quad-witching, options expiration date, and S&P indexes rebalances. Since the SPX roll event began last week, the market has dropped lower. We’ve seen prices start to chop sideways on Thursday as we approach Friday’s events… 

To gauge direction, we’re focusing on two key indicators, the 50-day simple moving average (SMA) and the Ichimoku Cloud. Every pullback this year, the S&P 500 (ES) has been breaking to the 50 SMA, and if it doesn’t stop there, to the daily Ichimoku Cloud top. 

When the ES retests the 50 SMA, the market is met with strong support that boosts the market higher rather than dropping to the Ichimoku Cloud. 

The ES held the 50 SMA on Thursday, and if it continues to hold that level and boost through the $4,480 range we could see a push back up to all-time highs at $4,550. 

Hold the 50 SMA, buy the dip. If we don’t hold the 50 SMA, it’s an even better dip to buy at the Daily Ichimoku Cloud. 

Watch the video above to see how the YM and NQ have acted and how they could push or pull the ES and the overall market. We’re keeping a close watch on GOOGL, MRNA, NFLX, and AMD for potential dip buy opportunities. 

Stay Focused!

 

 

Before we dive into our Focused List, it’s important to review the events that can impact the overall market this week. If we understand the events coming up and how they may affect market moves, we can have a better plan and make better trading decisions. 

Last week we reviewed the start of the SPX (Equity Index) Roll on Thursday, Sept. 9 and since then we’ve seen sharp moves lower, which we’ll break down in the video above. We’ll continue to see this event impact the market until it ends this week on Friday, Sept. 17. 

There are a handful of new events happening this week like Quad-Witching on Friday, Sept. 17, the expiration of Equity options and futures and Futures and Index options and futures that can lead to pinning action by big money. 

We have the S&P Indexes Rebalance on Friday, meaning big funds will rebalance their portfolio and adjust their positions based on last quarter’s results. Finally, we have the Philadelphia SOX (semiconductor) Index Rebalance, adding to our events list on Friday.

Here is our focused list:

GOOGL — Dropped hard with recent news regarding the Apple App Store but without the noise, we had a nice drop to the daily mean at $2,817. After Friday’s drop, we want to remain patient to see if GOOGL can present a dip buy opportunity. If GOOGL holds the daily mean at $2,817 and the bottom of the 4-hour Ichimoku Cloud, look to take a dip buy for a push up to $2,874 and potentially $2,900. 

ROKU — Continued to drop this week. If it continues to hold $323 and the market starts to rally, look for a dip buy opportunity. Both Point Of Control (at $338) and the Daily Mean (at $350) are above ROKU’s current price. Use the $325 zone to facilitate a pop to the $331 and $336 range.

SQ — Broke into a key level at the 200-day simple moving average (SMA) with a beautiful recovery higher on Monday. Keep an eye for price to head back towards the 200 SMA for a great dip buy level. Should SQ hold the $244.35 key level, work SQ up to the 50 SMA or $260 range.

Stay Focused!

 

 

This week we’ll be focusing on the volatility index (VIX) as a key chart to watch. Generally, if the VIX pumps higher, we should see the market move to the downside. We typically see the VIX boost into the 2-3+ average true ranges (ATR) and then die down. 

Based on the structure of the market, we could see prices start to grind higher to the upside if volatility subsides. The S&P 500 (ES) and Nasdaq (NQ) maintained structure last week, while the Dow Jones Industrial Average (YM) flushed to around 34,500. 

Let VIX tell the story for the market this week. If volatility fades, the market could see a nice recovery higher. Be patient because in a bullish market, a few days of selling pressure can bring the strongest names like AAPL and GOOGL back to the buy zone.

Stay Focused!

 

Nothing can test a trader’s patience quite like a choppy market.

When markets are rallying or fading there is action, momentum, and what often feels like a lot of opportunity for profitable trades. Where a trader’s patience and fortitude can be tested is when the market finds itself trapped in a tight range for days on end.

This is what we’ve seen in the market this week.

To sit and stare at the charts during a chop fest is an exercise in frustration and one that is likely to rob you of your peace of mind. So what’s our suggestion for handling emotions when the markets are stuck?

Set alerts and walk away!

Chart alerts can be one of your best friends as they can keep an eye on the market for you. When things are range-bound, we like to set alerts at key points both above and below the current price and simply walk away… letting the alerts work.

The beauty in this is that if the market happens to make a meaningful move, you will be alerted. If instead the chop fest continues and nothing of substance happens, your alerts will not get triggered and you will know that nothing meaningful is taking place while you’re away from the charts.

For example, look at the Nasdaq (NQ) chart this week (shown below). We had alerts at levels above and below its recent range and none of those alerts were triggered. Instead of watching every minute of price action and pulling out our hair, we let the alerts work and were able to detach ourselves from the chart knowing nothing was “changing.”

 

 

Letting the choppiness of the market steal your peace of mind can lead to unwarranted exits, overtrading, and unnecessary anxiety. Let the alerts do the work for you and don’t be a victim of the chop. More often than not, the chop is just “algorithm-driven” noise designed to shake you out of good-looking positions.

In this Sunday’s video, we’ll cover a few of our favorite setups that should be poised to make solid moves once the chop fest ends. We’ll talk to you on Sunday! 

Stay Focused!

 

 

Last week we saw the market mostly chop around and this week the selling began. It’s important to anticipate when the market will drop so we can position ourselves wisely. The first step to understanding when the market will make big moves is being educated and aware of the economic events that will occur throughout your entire trading career.

This week, specifically on Thursday, Sept. 9, the SPX (Equity Index) roll began and will continue until next Friday, Sept. 17. It’s important to understand what these events are, when they occur, how they affect the market, and how we can prepare to trade them. 

Every quarter big money takes time to lower the market, sell positions, and roll out into further expirations. What this means is that big money is getting ready and positioning for the next quarter, which is ultimately what is sending the market lower this week. 

We can expect more volatility these next two weeks as quarterly futures contracts expire and big money managers roll over their positions. The ES (S&P 500) has experienced a healthy pullback over the last few days with a reversion to the mean. We plan to continue to buy the dip and drive the market higher following the rollover.

Watch the video above to review current stocks we’re watching such as GOOGL, ROKU, and TSLA. Remember to familiarize yourself with events that move the market every week, month, and quarter. Be patient, and let’s finish the week strong. 

Stay Focused!

 

 

Let’s walk through how to build a watchlist not just for individual stocks but for particular sectors.

While we primarily like to base our scans on the squeeze setup, there are many good looking trends in sector groups that could be overlooked due to focus on the well-known tickers like TSLA, GOOGL, and FB.

The financial and communication sectors are groups that have shown strong trends and daily squeezes that offered us great setups in the Compounding Growth Mastery. In the next few weeks, we’ll be focusing on sectors that are setting up in the buy zone and could provide a nice set of opportunities.

Watch the video above to review the individual sectors and learn how to build a watchlist for high-probability setups. 

Enjoy the rest of your holiday weekend!

Stay Focused!

 

The trend is your friend… you just need to know how to find it!

As traders, it is easy enough to fall in love with certain stocks as the years go by. The danger of this is that our favorite stocks and sectors aren’t always going to be “in play.”

For example, technology has been one of our favorite sectors to trade this year; however, we only enjoy trading technology when it is setting up for our ideal entry. Rather than force the trade and break our rules, our mindset is to trade anything that fits our criteria and ignore anything that doesn’t.

While technology has offered many profitable opportunities for us over the last few weeks, we’re heading into the weekend with the group too extended for us to take new entries (chart below). While we wait patiently for a pullback in technology there are a few other trending sectors setting up at the buy zone right now.

 

 

One of our favorite sectors is healthcare — XLV. This has one of the better trends in the market and we took an entry this week in the Compounding Growth Mastery as it pulled back to the 21 exponential moving average (EMA) with a brand new daily squeeze. Charts within the group such as UNH, LLY, and others are setting up nicely here and could provide a nice set of opportunities over the next few weeks. 

 

 

Another favorite of ours is the financials — XLF. This is an example of another great trend finally presenting a fresh daily squeeze at the 21 EMA. We’ll be keeping an eye on setups on GS, JPM, and MS for entry opportunities in the weeks to come.

 

 

In this Sunday’s video, we will walk through our process of identifying the best sectors and trends to swing trade. Just as important we’ll show how to find the best setups within each sector. Trend, structure, and momentum are the only things we want to focus on as traders. Once you know how to consistently find the best combination of “the “big three” —  trend, structure, momentum — the game gets a whole lot easier.

We’ll see you in Sunday’s video!

Stay Focused!