1/13/2019 Stocks rebound this week – charts point to a bit more upside next week. Still bearish for 2019.

QQQ Weekly 1_12_2019.JPG

QQQ, along with the SPY and DIA, are now well above the February lows.  Shorts are likely trapped now and may start to cover their positions. As a result, I think we will continue to move upwards towards the 170 level (another 5% up or so), until we start our next leg lower.

Since we’ve broken down below the February lows on high volume, I think we will move lower for 2019 and work our way down to 135 or 110.

SPY monthly 1_13_2019.JPG

Here’s the SPY on the monthly chart. The two levels of support are at around 215 and 180. 180 is a much stronger support level, and I think we could test 180 in 2019.

12/29/2018 Stocks bounce and retest February lows from below. Short term direction is unclear, but long term we are looking for more downside.

Hi everyone. Stocks had a very unexpected bounce upwards this week. I suspect most of the bounce was due to shorts covering (profit taking) since we had no significant news to act as a catalyst. 

QQQ weekly 12_29_2018.JPG

QQQ has regained the February lows near 150. This could signal a bear trap since most people would be stopped out anywhere below 150. As a result, we could easily see more buying up to the 170 level until we ultimately move lower. Out of the three major indexes, QQQ is doing the best by far. 

SPY Weekly 12_29_2018.JPG

SPY (the stock market) is having a lot of trouble breaking past the February lows at 250. We retested it from below and have pulled back slightly. I suspect this 250 level will act as strong resistance in the following weeks. A weekly close above 250 is bullish, but the longer we stay below 250, the more bearish the charts are. 

DIA Weekly 12_29_2018.JPG

DIA has closed right on the February lows at 230. If we see a close above 230 next week, that’s bullish, but if we close below that, it would be bearish. The DIA chart is nearly identical to the SPY chart. 


 

One of my readers left a comment asking me about book suggestions and how to get a deeper understanding of the markets. I recommend the Market Wizards series by Jack Schwager and What I learn Losing a Million Dollars by Jim Paul. These books will hopefully get you thinking in a different way about the markets. If not, at least they are very entertaining books. 

Other than reading those books, I recommend taking detailed notes of your trades in a trading journal. I have a word document with charts and detailed notes about each of my trades. Below is an example of a past trade from my trading journal. 

6/4/2018 FANG – Pullback to Value (This is the type of trade)

FANG (In the chart below, SL = Stop Loss and PE = Profit Exit. RR = Risk Reward ratio) 

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Daily Chart Above

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Weekly Chart Above

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Notes:

At 9:20 AM on Tuesday 6/19/2018, I removed my profit exit on FANG and am waiting for an end of day candle to decide what I want to do with the SL at 103 and the new profit exit.  The reason is that the market is selling off hard, and FANG is up over 4%.

6/21/2018 – Two days later, FANG drops about 4% intra-day and I sell near the low of the day because I’m scared of losing my profits. God damn it.  Don’t get rid of profit exits after setting them ahead of time.  Sold at 124.74

7/9/2018 – Sitting at 137 and the biggest dip was to 121.5 ish.  Yikes.


 

See you next week, and I hope you enjoyed this week’s blog post. 

12/21/2018 Stocks collapse this week. Longs should have been stopped out. I’m still bearish medium and long-term.

Happy holidays everyone! 

Last week I mentioned that the negative sentiment would likely lead to an upwards bounce in the near term, but quite the opposite happened. At least I’m still correct on the longer term bearish call. 

QQQ Weekly 12_21_2018.JPG

QQQ (Nasdaq) has broken the February lows on high volume – a very bearish sign for the medium to long term. I expect QQQ to work its way to the next support level near 135. Also, we are now officially in “bear market” territory since QQQ has dropped over 20% from the recent high. 

SPY weekly 12_21_2018.jpg

SPY has also sliced through support (February lows) on high volume. Last week’s trading idea would have had you stopped out at 255 for a small loss. The next two rectangles highlighted are the next supports to watch for. 

MU Weekly 12_21_2018

MU continues to struggle this week (we are down over 11%). If we look at the drop from the last cyclical cycle between 2015 and 2016, MU would have to drop to about $16 to bottom. That seems like a possibility in the next 6-9 months (2-3 quarters). 

MU Monthly 12_21_2018.JPG

Here’s the monthly chart of MU. I will be looking for smaller monthly candles to hint at the bottoming process. I plan to accumulate lots of shares in the 10-20 range (middle to the bottom of that range preferably) in anticipation of the next bullish move upwards. 

Happy holidays again!

12/14/2018 Stocks drop, but negative sentiment could lead to a bounce. Indexes are at the bottom of the trading range and offer a good short-term buying opportunity.

Greetings.

This week’s AAII sentiment reading was very bearish. We want to use this as a contrarian indicator, meaning we do the opposite of what the crowd does. If everyone is bearish, they have either already sold or are going short. That means it is more likely that we move up. Below is the screenshot of the AAII sentiment reading this week. Below that are weekly charts of the indexes with trading ideas. 

AAII sentiment 12_14_2018.JPG

SPY Weekly 12_14_2018.JPG

I’m still bearish on the market, but the short term looks like a great buying opportunity for a 2-3 week bounce play. We want to sell near or just below 280, and have a stop loss near 255. That’s a risk of 5 for a reward of 20. 4 to 1 risk reward. 

DIA weekly 12_14_2018.JPG

DIA has a very similar chart to the SPY. Buying here near 240 makes sense with a stop loss near 235 with a profit exit at 260 or just below. Risk reward is 4:1. 

QQQ weekly 12_14_2018.JPG

Buy near 160, with a stop loss at 155 and a profit exit at or just below 175. Risk reward is 3:1. 

12/8/2018 Bears are beginning to overpower bulls. Last week’s gains are mostly wiped out. QQQ, MU, BABA.

QQQ Weekly 12_8_2018.JPG

QQQ opened the week significantly higher but has ended the week nearly 5% lower.  It seems very likely that QQQ will reach the low 150s now. I’ve drawn a downward trend line in the weekly chart above. As you can see, the downward trend line and the major support level intersect at about ~152. That would be a decent place to go long if you are looking for a quick bounce. 

MU weekly 12_8_2018.JPG

MU has continued to struggle along with the rest of the chip sector and market. I’ve labeled a few key levels in the weekly chart of MU above. Currently, MU is testing the previous low at 35, and I believe this price level will not hold. I suspect MU will retest the high 20s in the coming months (labeled 2 in the above chart). The last price level labeled ‘3,’ which is in the mid to high 10s, is very strong support where I will be buying. Lastly, although the chart doesn’t show it, the 9-10 dollar range is the low of the last cyclical cycle in 2016. 

BABA 12_8_2018.JPG

BABA opened the week significantly higher, but has dropped 10% from high to low this week. S1 was the previous significant support level (170), which is where BABA has met overhead resistance. I think BABA will work its way to S2, the previous low at 130. If that breaks, look for a test of S3, which is at a price of 110. 

See you next week!

12/1/2018 Markets surge over 5% this week! Bears should consider shorting this “rip.”

I was quite surprised by how much the market jumped this week. Here are the weekly charts of the indexes.

Bears waiting for a jump in prices to sell into can now do so. I think the risk reward is now skewed towards the downside, so it makes sense to short sell or sell here from a short term perspective. 

If we do start to approach the previous lows, I expect rapid high-volume selling that drags the indexes down to February lows. 

Good luck!