Phase one of the squeeze, or “the buildup of energy” phase, is underway. During this phase, our job is to identify the cleanest setups the market has to offer and to begin building our positions. Phase one can last longer than we typically think, so be sure to give trades ample time until expiration.
As long as the indexes hold their bullish structure inside their daily squeezes, phase two of the squeeze, or “the release of energy” phase, is expected to bring us into new all-time highs. This should provide the momentum we need to make some profitable trades. During this second phase, tech stocks like GOOGL and MSFT are looking poised to lead the way.
The chop fest continued this week; however, the structure of the markets leads us to believe that a big move into new highs is just around the corner.
During phase one of the squeeze (the buildup of energy phase) the iron condors we’ve been selling over the last three weeks have been a great source of weekly income while making our jobs of sitting on our hands that much easier. This week we were able to close a little over $2,000 of profits from our condors.
Though the markets lacked any meaningful momentum this week we were still able to walk away with profits on our swing trades. This is one of the benefits of trading strategies like credit spreads… you get paid with the passage of time!
We were able to close both of our put credit spreads on CAT for 75%+ of max profit (good for $2,000), as well as our GOOGL spread (both shown below). We closed GOOGL this afternoon for just about 80% of max profit, which was good for a $15,300 profit (P&L below).
CAT Chart
GOOGL Chart
P&L for GOOGL Trade
Both CAT and GOOGL still look poised for moves into new highs, as do a few other names we’ll be covering this weekend in Sunday’s prep time video.
The name of the game is patience right now. Patience to wait for ideal entries, patience to sit through the chop, and patience to let your trades unfold in your favor.
Phase two of the squeeze (the release of energy phase) feels like it’s just around the corner, and that’s the move (driven by the indexes) that we believe will provide our next round of profitable trades. Stay tuned for Sunday’s video, as we’ll dive into some setups we’ll be looking to trade over the next few weeks.
The overall market chopped in place this week, but finally made a really nice reversion to the mean, met with a strong dip buy opportunity. Some big names like NVDA and GOOGL are also nearing dip buy levels.
Patience is king but this could be a very good opportunity for some dip buys into next week. The Nonfarm Payroll (NFP) job report in the morning is a big catalyst to keep an eye on. NVDA also has a stock split vote coming up, so something else to keep in mind.
The market is moving sideways, and does not seem to be able to make up its mind about pulling back or rallying higher. Normally we would look into intraday squeezes; however, most of them are not looking very clean right now so our focus is shifting to key levels. There are also some market catalysts such as earnings and investor meetings that are important to review.
Here’s our focus list for the week:
NVDA – Investor meeting on Thursday to vote on stock split. We’re keeping an eye for a continued push through all-time high (ATH) toward 670.
GOOGL – Stalking some squeezes on this one. If it can break 2400, then it has a shot toward ATH.
ROKU – Struggling with the daily Ichimoku Cloud. If it can hold up at the 50 simple moving average (SMA) and break back through 360, then it has a chance to head toward 380.
ABNB – Watching for a chance to buy the dip near 140, and seeing if it goes back above 146 to work its way toward 150.
SNOW – Watching for a chance to buy the dip below point of control (POC). Looking for it to break the 244 zone. This could be a big possible move if it happens.
SHOP – The four-hour squeeze is setting up quite nicely. Watching for it to break 1300, to see if it can work toward 1330 and 1360 to fill the gap.
Tech is setting up structurally for a push into new all-time highs over the next few weeks, as it has regained a bullish structure with a fresh daily squeeze, positively stacked exponential moving average (EMA) points, and support above the daily 21 EMA.
If we are looking to benefit from any potential momentum in tech stocks, we need to do so with the cleanest setups possible. GOOGL and FB have been clear leaders here, however they are too extended for new entries.
MSFT and AMZN look promising for potential entries as they have yet to make the 2+ average true range (ATR) move that GOOGL and FB quickly made. Watch the video above for more.
While this week was nothing but a boring chop-fest, the structure of the market still looks promising for a push into new highs over the next couple of weeks. The daily squeeze in the SPY (shown below) looks like it’s close to firing to the upside. And the QQQ (chart below) has finally recovered a bullish structure to its daily chart with a squeeze of its own and positively stacked exponential moving averages (EMAs).
Right now it feels as if everything is squeezing: SPY, QQQ, the Dow, and IWM have daily squeezes, and if that isn’t enough, almost every major sector ETF is setting up in daily squeezes as well (IYR, XLE, XLF, XLI, IYT, XLK). What this tells us is that across the board the markets are building up tremendous energy inside these squeezes and sooner or later that energy is likely to be released in the form of a run higher.
These are the moments in time when we need to get positioned in the cleanest setups the market has to offer and hang on tight (as long as they hold structure) in anticipation of a big move to the upside, fueled by the overall market’s squeeze.
Daily Chart for SPY
Daily Chart for QQQ
We’re locked and loaded with put credit spreads in GOOGL and CAT (charts below), both of which performed well this week. GOOGL is looking like it could be our next $20K trade, although adding to the position at this point would be less than ideal. We’ll be holding onto these positions until we get our moves to new all-time highs or until we collect 75% of max profit on the spreads (whichever comes first). MMM, AMZN, and MSFT are also of interest right now and we’ll cover those in detail in this Sunday’s premium video.
Daily Chart for GOOGL
Daily Chart for CAT
Though our major focus is on the directional-opportunity that we believe is just around the corner, we never hesitate to collect some easy premium if the market is doing nothing but chopping itself silly. This week we sold iron condors on SPX and NDX, selling calls and puts slightly further out-of-the-money than this week’s expected move. We were able to collect 80% of the max profit on each of these condors, good for a little more than $2,000 of “low-stress weekly income.”
This makes two consecutive weeks that we’ve collected some nice profits by selling condors, but we certainly are looking forward to the potential of these squeezes firing!
Enjoy your weekend, rest up, and we’ll talk to you this Sunday in the premium Watch List videos.
The Market is not really getting anywhere this week; however, we do have some great key levels in play and some nice squeezes gearing up for the next move. News made an impact for some stocks such as SQ, so for right now individual setups are best while we wait for a market-wide move.
Watch the video above for in-depth coverage of these individual setups such as: TSLA, FB, BA, and NVDA.
We continue to use the daily Ichimoku Cloud as a guide to see where the market will go next. The Cloud has been able to show us a pattern and we can utilize that information to plan our moves.
Here is our focus list:
SQ – News on Monday read “Square Plans To Offer Business Checking, Savings Accounts.” As we’ve learned before, news has an impact on the market. We are watching the 4-hour squeeze and 4-hour Cloud. If SQ can break and hold 211.5, we’re looking for 217 then 221.78/220C, which is a really nice option.
TSLA – Currently breaking into a 4-hour Cloud. If it can hold 606, we’re looking for a move toward 627 then 650.
ABNB – Setting up a really nice wedge on daily and 4-hour charts and a 4-hour squeeze with a 4-hour Cloud are also in play. If there’s a breakout, it could make a move toward the 4-hour Cloud top and right around 145/150 levels.
BA – Breaking a big daily downtrend, we’re looking for a push toward 241 and 244.65.
With the current structure of the daily squeeze in the SPY, we are looking for several weeks of upside momentum to capitalize on. We are also looking for a move in SPX into $4,250, which lines up with a new all-time high (ATH) at +2 average true range (ATR) on the daily chart.
The best swing trading takes place when the market itself is firing a squeeze, so now is the time to buckle-down and focus on getting positioned in the highest probability setups. A squeeze in the index means that most stocks may move higher, but you still want to be strict in focusing on nothing but your “go-to pitch” with setups that fit all your criteria.
As always, focus on stacking probabilities in your favor as much as possible. A daily squeeze for the SPY already indicates a high probability for a move upward across the board, but we want to focus on catching this momentum in stocks that have a high-probability structure that are part of a sector with similar high-probability alignment.
CAT is a perfect example of stacking the probabilities in your favor. The structure of the setup itself points toward a move higher and the sector it belongs to (XLI) has the same structure as well. Now, take into consideration the structure of the SPY, and you’ve found a setup where the odds of a move higher are stacked in your favor across the board.
The action in the market this week was a mirror image of the action we saw last week. During the session Wednesday (5/19), we saw the volatility index (VIX) spike 2+ average true range (ATR) on the daily chart (just like last week), and as a result we saw the indexes slide to -1 and -2 ATR on the daily charts (again, just like last week).
As tends to be the case, however, once the VIX fizzled out and began to fade back down toward its 21 exponential moving average (EMA) during sessions yesterday and today, the indexes made a strong recovery with a bounce back to the mean and finished the week with a solid structure to the daily charts.
Daily Chart for ES
With a bullish structure (positively stacked EMAs plus support above the 21 EMA) to the daily squeeze for the SPY/ES (chart above), we will be looking for this squeeze to fire long over the next few weeks, offering a lot of momentum-driven opportunities in our favorite setups. As for our favorite setups right now, we’ll be covering those in-depth in the Sunday e-letter video. Until then, here are a few we’ve got our eyes on (and a few we already have positions in).
GOOGL DAILY SQUEEZE (chart below):
Though tech hasn’t been our favorite as of late, the index is looking much better here on the daily charts and we believe as long as it can hold support above the 21 EMA, we could see a 2+ ATR move toward the upside over the next few weeks
GOOGL is our favorite setup within tech right now (FB is a close second) as it held bullish structure in its daily squeeze while the index broke down.
We’ve opened a long position here with a 6/18 -2990p/+2970p put credit spread, and are looking for this daily squeeze to lead to a move toward $2,400 (2+ ATR) over the next two to three weeks.
Daily Chart for GOOGL
CAT DAILY SQUEEZE (chart below):
While we do think tech and semiconductors could join the party to the upside, we also believe that the sectors that have been leading the way (XLI, XLE, XLF, IYT) could continue to move higher.
We like the industrial sector (XLI) here, and the daily squeeze in CAT is one of our favorite setups in the group. We like it so much, in fact, we added to our Jan 11 expiration put credit spreads this week.
Like we do with every long setup we take, we’ll be looking for a move into 2+ ATR to upside around $248/share.
While CAT is our personal pick in the industrial stocks, we think MMM has just as beautiful of a structure to its chart as well! Just remember, be careful getting too much exposure in one single sector, as it’s essentially the same setup looking for the same move.
Daily Chart for CAT
IYR DAILY SQUEEZE (chart below):
The daily squeeze in the real estate sector (IYR) is picture perfect here and we have an order working to take an entry on a June monthly expiration put credit spread.
Aside from the structure of IYR itself, we love how the individual stocks within the group are set up just as nicely, signs of a potential group move (which are often the strongest moves).
Daily Chart for IYR
We’ll cover a few more setups with you this Sunday, but for now here are a few of our favorites! As for closed trades this week, things fared pretty well!
SPX iron condor (chart below):
On Monday morning, we sold an iron condor on SPX for expiration, looking to benefit from range-bound chop. After a bit of a “gut check” early Wednesday, the market was able to bounce nicely as volatility died down and the bounce was good enough for us to buy back the condor at 80% of max profit (a $1,300 profit on 10 contracts).
As nice as these condors can be, they can become risky when the market is squeezing on the daily chart. With that being said, we’ll hold off on taking new condors for now with a bigger focus on allocating that capital to directional trades.
Daily Chart for SPX
NFLX Call Credit Spread (chart below):
With a bearish structure to the weekly chart and daily chart, we sold a call credit spread on NFLX a couple of weeks ago looking for a flush into -2 ATR on the daily chart, and that’s just what we got!
As VIX spiked and the markets slid on Wednesday, we took advantage of the fade and bought back the NFLX spread at 50% of max profit (a $3,800 profit).
We think there is more downside left for NFLX, but we are going to avoid shorting it again (for now) as the overall market looks promising for some nice upside.
Daily Chart for NFLX
NVDA Put Credit Spread (chart below):
Somehow, some way, the NVDA (5/21) 605/595 put credit spread we sold in late April came back to break even (after being at max loss for weeks!) this morning after the company announced a stock-split. This was simply pure luck, but we were more than delighted to close this at break-even after buying the spread back at $3.50 this morning.
If there’s anything that can be taken from this, it’s that once a position is at 90% of max loss there is not much left to salvage by closing the position. Though it’s rare, every now and then lightning can strike and the position can come back in your favor. We don’t hope or expect for this to be the outcome, but we certainly don’t complain when it does!
We’ll continue to avoid NVDA until earnings pass and the chart looks better.
Daily Chart for NVDA
Another week in the books, and the potential for some great opportunity over the next few weeks looks promising! We’ll be reaching out on Sunday with the Focus List video and we’ll jump into the details of all our favorite setups. Until then, rest up, and have a safe weekend.
