This week the overall market continued to trade lower as the structure for most of the market continues to look more bearish. While there are still trends we are pursuing to the upside, like energy, oil, and consumer staples, there are plenty of setups we’re eyeing for shorts.
While we will look to short individual stocks (like we did this week in DASH, NKE, and FDX), looking to short in the indexes is often the “simplest” option. With that being said, we’re going to need to see a bounce in SPY and QQQ before entering a short.
We use Keltner channels, measuring +1 and +2 average true ranges (ATR) above the 21 exponential moving average (EMA), as our upside and downside targets for swing trades.
The SPY and QQQ are currently trading at -2 ATR on the daily chart, as shown below. This is the spot where we’d look to take profits instead of opening a new short position. When trading at the 2 ATR extension, there’s a growing probability of a move back to the 21 EMA around the corner. Getting short at -2 ATR and sitting through a bounce to the 21 EMA is no fun.
Over the next few weeks, we’ll be waiting for a move into the 21 EMA to open shorts on the SPY or QQQ, with downside targets of -2 ATR.
Remember that we’re once again in earnings season, so there’s always the potential that earnings from big FANG stocks could shake things up.
In Sunday’s video, we’ll cover more of the bullish and bearish setups we’ll be looking to trade next week in both the Simpler Trading Options Gold room and the Compounding Growth Mastery.
Stay Focused!
