3/19/2018 Market Review

Fun Fact #4

Did you know that you can buy a stock, have the stock go down, and still make money?

This requires a simple options strategy called the “Covered Call.” I will discuss this options strategy in a future post.


 

QQQ analysis 3_19_2018

If you listened to my suggestions this morning on scalping the gap fill, you almost certainly lost money.

Facebook is down over 8% if you count after hours. Since Facebook is about 5.5% of QQQ, it is responsible for a good portion of QQQ’s downside today. 

For swing traders, I still think now is a good time to buy a partial long position (start scaling in) or hold onto your long position. QQQ has pulled back from all time highs and crossed the 20 day EMA, and as I discussed in my post “A setup that has an edge,” this represents a good dip buying opportunity. Or simply buy the largest components of QQQ, which are the FAANG stocks (FB, AAPL, AMZN, GOOG, and NFLX). These 5 stocks represent about half of the QQQ. 

Take a look at the QQQ chart below for the last year. Other than the February “mini flash-crash,” everytime the QQQ crossed below the 20 day EMA (as indicated with the circles in the chart), it recovered and reached a new all time high. 11 out of 12 times in the last year, the QQQ bounced. Remember that all the pros and my favorite trader are still bearish (since last week), so make your own decisions regarding what you think is best. Hey, you could even bet against my predictions if you find that I’m consistently incorrect. 

QQQ analysis 3_19_2018 Yearly
QQQ Cross below 20 day EMA

The weekly chart below seems to confirm that we will retest the 160-163 levels, and these levels offers a good risk to reward. Assuming the recent news and the Feds meeting on Wednesday doesn’t derail the bull market, I’d say patiently wait for the high 150s or low 160 levels to add to your long positions. Even better, you could wait for a retest of the February lows in the low to mid 150s. 

QQQ analysis 3_19_2018 Weekly

The daily charts of DIA and SPY are below. I would recommend that if you end up deciding to buy one of these ETFs, QQQ is the best choice because it is in a stronger uptrend and just pulled back from an all-time high. Notice how the 20 day EMA is below the 50 day SMA for both the DIA and the SPY where as the QQQ’s 20 day EMA is comfortably above the 50 day SMA. 

SPY analysis 3_19_2018DIa analysis 3_19_2018


 

Stocks to add to your watchlist:

Facebook (FB) is a noteworthy stock to consider buying. Take a look at the charts below:

FB analysis 3_19_2018
Daily Chart of FB

Notice the high volume selling on the daily chart above. This may indicate that everyone that wanted to sell already sold today. 

 

FB analysis 3_19_2018 Weekly
Weekly Chart of FB with the support zone highlighted in the rectangle.

FB has crossed below the 20 week EMA and has dropped into the 165-170 support zone. From a technical standpoint, this is simply too juicy not to buy for a swing trade. 

If FB drops below 160 (put your stop loss around there), that signals to me that price may continue lower. Otherwise, you can take a long position in the 165-170 price range with a profit target in the 185-190 range.

Thanks for reading, and I look forward to you coming back here tomorrow. Good luck trading! 😀

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