Happy Friday, traders! With the markets extended to the upside over the last few weeks, we offered the advice to prepare ourselves for a sudden selloff. Sure enough, the selling pressure finally hit this week as the markets flushed to the downside.
Despite the flush the markets bounced considerably into the end of the week, setting the tone for what should be a very interesting month of October. It continues to be daily charts versus weekly charts here, a classic battle throughout the course of any uptrend.
Both the S&P 500 (SPY) and Nasdaq (QQQ) held bullish structure perfectly this week (charts below), bouncing with a vengeance off their weekly 21 exponential moving averages (EMA). Holding weekly structure implies that the selling pressure may dissipate here, but the structure of the daily charts implies the potential for a lot of back-and-forth chop.
We are long some good-looking setups here but are moving forward with caution. Should the indexes fail to get back above their daily 21EMA, there is the potential for some nasty chop or another flush. If instead the markets can simply hold firm here, we’ll be looking for the setups that maintained their bullish structure in the face of volatility to continue moving higher.
We’ll cover a few of the setups in detail in Sunday’s video, but names like TSLA, ZS, NFLX, and a few others are catching our attention. TSLA is a perfect example of a stock that held structure perfectly while the rest of the market declined. Not always, but often these are the first stocks to rip higher once the market stabilizes. All week long TSLA held strong inside its 4 hour squeeze, which is on the verge of firing to the upside into Friday’s close.
The put credit spreads we sold in the Compounding Growth Mastery on Thursday are already shaping up nicely and we’ll look for continuation into $780 to $790 next week.
With the daily charts of the indexes “leaving a bit to be desired”, patience, discipline, and a strict focus will be very important over the next few weeks. Keep an eye on your inbox for Sunday’s video, where we will dive into setups we think could offer opportunity in the weeks to come.
Stay Focused!