6/24/2018 Markets look extended. I’m looking for at least a 5% correction in technology stocks within the next two weeks.

At this point, I’m unsure if tariff news have much of an impact on the stock market anymore.  Although the initial news triggers selling, the dips seem to be aggressively bought up, at least for technology stocks.  

Either way, price action is telling me that technology stocks are overextended and thus, I’m looking for a 5% or larger correction in the QQQ.  Something interesting is that the S&P500 and Dow Jones outperformed the QQQ significantly in the most recent two trading days.  I don’t remember this happening in the last few months.  

To reduce risk, you can also consider a pairs trade.  You can short QQQ and buy SPY.  In this scenario, you are betting that technology stocks under perform the overall market.  

QQQ daily 6_24_2018.PNG

I added a short position on QQQ on Thursday after market close near 175.35.  My mental stop loss is at 178, and my hard stop loss is set at 179.  The rationale is that if this is the next move down, QQQ shouldn’t be hitting new all time highs.  Judging by previous moves down, if QQQ drops the same magnitude of 12%, QQQ would be trading at 156-157.  If QQQ drops into the 166-170 support zone, I plan to move my stop loss down to my entry point.  

 

SIG daily 6_24_2018.PNG

I’ve been eyeing this short position on SIG for a couple weeks now, and I finally pulled the trigger on Thursday last week.  SIG has been in a consistent downtrend, and has now broken out into a large resistance area between 58-60.  I’m banking on the fact that buyers are exhausted, and price will retest the 50-51 level.  The risk reward was about 4 to 1, meaning I could be right 25% of the time on these kinds of trades and still come out even.  

 

MGM daily 6_24_2018.PNG

I’ve taken a pretty large position in MGM at 30.  Friday’s action was quite bearish, but I’ll let the trade play out.  Somehow this price action reminds me of my trade on AA last week. 

My stop loss is at 29.15, with a target profit area at or above 33.5.  The risk reward is about 4 to 1 again.  

 

MGM weekly 6_24_2018.PNG

Here’s the same trade on the weekly chart.  As you can see, MGM is still in an uptrend, and has now fallen to the bottom of the trading range (support).  

Have a great weekend!

6/16/2018 Weekly review and next week’s forecast. I found some more pullback setups!

Market Stocks 6_16_2018.PNG

I’m bearish in the short term (next two weeks), and you can see that reflected in my targets for June 29th.  I hate fighting the trend though.  Even if we move up, I expect very muted gains (no more than 3% higher). 

I’ve added three more stocks to the watchlist.  I’ve added a long position (at $46.9) on Alcoa Corp (AA) with 2% risk to my account instead of my normal 1%.  The stock checked off every single box I had on my trading plan. 

For reference, I’ve only found two other trades in my 10 months of trading that checked off all the boxes.  Those two trades were MU trading at 47.4 and BABA trading at 167.  I exited those positions recently near 59 and 206 respectively.  

Unfortunately, AA immediately dropped 5% the same day I bought it.  Sometimes you find the “perfect” setup and trade everything according to the plan, but the trade still goes against you.    

Let’s look at my analysis of AA, and then we will look at the major indexes. 

AA Trade 6_16_2018.PNG

Here’s the AA trade that is in my trading journal.  It’s a little bit more messy than my normal entries, but hopefully it’s easy to understand.  RR = Risk Reward, SL = Stop Loss. 

If we snap back above 47 in a couple days, that would signal a false downside breakdown and I will probably be adding to this position and raising my stop loss up.  

 

QQQ Daily 6_16_2018.PNG

I mentioned last week that I expect QQQ to retest at least 170, which I still think is the most likely scenario.  It might take 2-4 weeks for that to happen since volatility has died down. Thus, I am not adding any long positions and will be buying QQQ in the 167-170 zone with a reasonably tight stop loss.  

I have not changed my opinion on the other indexes (DIA, SPY, and IWM) since last week.  

If the markets drop, I expect DIA to test 243, SPY to 272.5, and IWM to 163.

Thanks for reading! 

5/8/2018 Markets flat as markets fail to break through resistance. QQQ to retest 162 by the end of the week?

Fun Fact #44

When a company buys back its own shares (share buyback), the common misconception is that the EPS will increase.  The EPS is Earnings “Per Share,” or Earnings/Shares, so if the company bought back shares, lowering the denominator, wouldn’t the EPS go up? 

Unfortunately, the denominator of EPS is actually the “weighted average number of shares,” meaning the number of shares is averaged over a year.  Thus, buying back shares will not impact the EPS ratio. 


 

Market Stocks 5_8_2018.PNG


 

QQQ 5_8_2018 Daily.PNG

I think that if QQQ doesn’t close green tomorrow, we will probably see a retest of 162 by the end of this week or early next week.  Notice how the downtrend line from the March highs intercept with the 162 support level.  That makes the this level even more important.  If QQQ did drop to 162, that’s a drop of another 4 points.  Since 4 points is only 2.5%, this drop could happen in one day. 

The reason why I’m bearish all of a sudden is because I think Apple will see a pullback due to aggressive profit takers.  Also as a side note, I just sold my Apple position today. 

See you tomorrow!

5/7/2018 Technology stocks lead the way higher. Time to take profits on Apple (AAPL)?

Fun Fact #43

Warren Buffett still plays Ping-Pong!  He played against Bill Gates at Berkshire’s annual shareholder meeting today. Source. 


 

QQQ daily 5_7_2018.PNG

QQQ is running into overhead resistance. We will have to see if QQQ can push through this level tomorrow or if we pullback from here.

AAPL 5_7_2018

Apple is the largest component of QQQ, and it looks like it has found a temporary top.  It looks good to buy in the 177.5-182.5 zone, although I favor the high 170s since it offers a better risk to reward. 

BABA 5_7_2018.PNG

One more push, and BABA will be at 200 again! Unless you think we break out over 205, it’s probably a good idea to take partial or full profits near this price. 

5/3/2018 The major indexes recover from large morning losses and most close slightly down. The Dow Jones bounces off the support zone near the 200 day moving average.

Fun Fact #41

During yesterday’s earnings call (5/2/2018), Elon Musk cut off the analyst that was asking him questions and said: “Excuse me. Next. Boring, bonehead questions are not cool. Next?”

Immediately after the next question, Elon Musk irritatingly replies: “We’re going to go to YouTube. Sorry. These questions are so dry. They’re killing me.”

Source


 

Market stocks 5_3_2018.PNG

DIA 5_3_2018.PNG

Dow Jones was down nearly 400 points today. As you can see in the chart of DIA, the ETF representing the Dow Jones was down 4 points in the morning. 

I’ve circled each time the index has bounced off at or near the 235 level. If DIA closes below that level, we could see another 5-10% more downside. 

Tomorrow, Alibaba (BABA) is reporting earnings at 6:30 AM eastern time before market open. Since there are low expectations going into earnings, I think there’s a good chance BABA will move upwards and test 190 tomorrow. Anything can happen though. 

5/2/2018 Markets sell off despite Feds not raising interest rates. It’s not a good sign for the bulls when the market moves down on “good news.”

Fun Fact #40

Did you know that France cut Cryptocurrency taxes by 50% a couple days ago? 


 

Market Stocks 5_2_2018.PNG

I’ve updated targets for May 25th, which is 3 weeks from this Friday. As you can see, I’m medium term bearish after today’s price action. Despite Feds not hiking rates, the market still sold off. I am still bullish on Facebook and Apple though, as I think their earnings reports were really strong and will propel them upwards. 

I’ve also added an “If wrong” target, meaning if the market decides to rally (against my prediction), I expect the market to reach those targets by May 25th. 

AAPL 5_2_2018.PNG

My May 25th target for Apple is the top of the trading range, which is at 183. If Apple decides to sell off with the market, I expect it to gap fill back to 169. 

FB analysis 5_2_2018.PNG

I think Facebook has a good chance of climbing to 185 within the next three weeks, highlighted by the upper horizontal line in the chart above. In case I’m wrong and Facebook sells off, I think it will drop to the previous support/resistance level at 168

QQQ 5_2_2018.PNG

Lastly, let’s look at QQQ. I think there’s a better chance we hit 155 before we gap fill to 171. I do not think the bull market is over, but I think QQQ will retest 155 before moving back to the 170s. 

4/24/2018 Markets Slump and QQQ breaks through a key minor support level. MU is a “screaming” buy.

Fun Fact #34

Did you know that lump sum investing (investing all your money when you get it) is significantly better than dollar cost averaging (investing a fixed amount spread out over time)? Here’s the source from Time magazine. 


 

Market stocks 4_24_2018.PNG

As you can see, the stock market sold off really hard today. The major indexes did significantly better than the FAANG stocks, with most of them selling off over 3%. The Russell 2000 index (IWM) only dropped .57%, signaling that small cap stocks are still holding up nicely. That is the one reassuring thing about today’s price action.

As I was saying yesterday, I believe that if QQQ broke through 162 and closed below it, I would turn bearish. That is exactly the case. You can see that I’ve switched sides for my targets. However, I am not short, and wouldn’t advise shorting until QQQ retests 162. Your target would be 154 since that is the next support level down. 

In conclusion, I still prefer sitting on cash over shorting an up trending market. 

I do favor a bounce upwards in the next few days, but I think we are ultimately heading lower to retest the previous lows since QQQ broke through 162. 

IWM 4_24_2018.PNG

Above is ticker IWM, which is the ETF that tracks the Russell 2000 Small Cap Index. 

QQQ analysis 4_24_2018.PNG

Here’s the QQQ. Since we broke through and closed below 162, I would either sit on cash until QQQ tests 154, or be aggressive and short QQQ if it retests 162 from blow. 

MU analysis 4_24_2018.PNG

I think MU is a screaming buy here because this trade presents an excellent risk:reward ratio. Also, MU has fallen into a support region highlighted by the rectangle above while being in an uptrend. Your stop loss would be placed at or near 44, with a profit target somewhere between the mid 50s to low 60s. 

4/23/2018 Markets mostly steady. Looking like we will have a nice move upwards tomorrow. Google earnings were ‘average.’

Fun Fact #33

Did you know that Elon Musk (CEO of Tesla) has recently been sleeping on the Tesla factory floor to save time? And yes, Elon Musk is a god. Here’s the CNBC story


 

Market Stocks 4_23_2018.PNG

Sorry for the late post today. Life decided to slap me in the face, but I decided to get back up and slap it right back. I figured as long as I update my blog before midnight Eastern Time, we are still good to go. I still have 30 minutes to go as of this writing. 

Without further ado, let’s discuss some stocks! 😀

Although the major indexes didn’t drop much today, the smaller cap stocks like MU and SQ didn’t perform very well. Chinese stocks also didn’t do too well either as you can see from BABA’s stock price. 

I think MU is looking good to buy in the 46-49 range. You would place your stop loss 3-4 dollars below the entry, and a profit exit in the 57-62 dollar range. Note that “SL” in the chart below stands for “stop loss.”

MU analysis 4_23_2018.PNG

The daily chart of QQQ is below. Read the text below the chart for details.

QQQ 4_23_2018.PNG

As long as QQQ stays near or above 162, I think we see higher prices ahead. We are currently right at that level which is quite scary. Another significant red close tomorrow will probably make me bearish in the short term. Otherwise, I stay cautiously bullish. 

On a final note, let’s look at Apple (AAPL). 

AAPL 4_23_2018.PNG

Apple broke through a key support level of 165 today, but closed back above that level. Notice how the 165 level also corresponds with the 200 day moving average (the red, upward sloping line above). 

4/22/2018 A look at the major indexes. Targets updated for Friday May 4th.

Fun Fact #32

Did you know that at the Seattle Amazon headquarters, there are 6,000 dogs that share the work space with the employees? They even have a doggie deck 😀 Source


 

4_22_2018 Market Stocks.PNG

I’ve updated my targets for May 4th, 2018. I’ve refrained from updating the targets for stocks that have earnings in the next week because earnings are extremely unpredictable. However, I do favor a run-up prior to earnings, which I reflect in my targets for QQQ, DIA, SPY, AAPL, and BABA. 


 

I’m cautiously optimistic because the indexes have dropped to a support level that I believe will hold, but if they don’t hold, look out below! I also like buying the first pullback after a strong move upwards, which would be right now. 

QQQ 4_22_2018 Daily.PNG

The daily chart of QQQ is above. The index has gap filled the 163 gap with a rapid downward move largely due to Apple. The last time QQQ had a fast rally up from the February lows, we pulled back to this level (162-164) before moving to all time highs around 175. I think something similar could happen this time, but earnings from the big companies need to be good next week. I’ve drawn a horizontal line in at 160, since this is the weekly trend channel support. As long as QQQ holds that level, I believe we have a good chance to at least gap fill to 170 within two-three weeks. Take a look at the weekly chart of QQQ below.

QQQ 4_22_2018 Weekly.PNG

I’ve highlighted the touches of the trend channels with the colored arrows in the weekly chart of QQQ above. Notice how good this trend channel is at capturing price movement. 

DIA analysis 4_22_2018 Weekly

On the weekly timeframe, DIA (the ETF that tracks the Dow Jones) is stuck right at the middle of the support and resistance levels. This makes it hard for me to make a decision on the direction, but I favor it running up to the 255 resistance level rather than it hitting the 235 support level. This is a tough call to make. 

SPY weekly 4_22_2018.PNG

Notice how the weekly chart of SPY (the ETF that tracks the S&P500) looks identical to the DIA chart. We are stuck in the middle of the support and resistance level so it’s hard to pick a direction. 

To wrap up, I think the indexes have a good chance to move up early next week since they are currently at support levels and I expect good earnings from the big technology companies like Google, Amazon, and Facebook. From a longer weekly perspective , the SPY and DIA are still in the middle of the trading range, so patient traders looking for good prices should wait to buy near the bottom of that range, and look to sell at the top of that range. That would be buying at roughly 235 on the DIA, and 255 on the SPY. You would sell near 255 and 280 respectively. 

Have a great Sunday!

4/20/2018 Markets sell-off with Apple leading the move down.

Fun Fact #31

Did you know that in the Chinese Stock Market, once a stock rises or drops 10%, the trading is halted for the day?


 

I will do a weekly analysis update on the major indexes and FAANG stocks tomorrow or Sunday. I will also update my targets sometime this weekend.

AAPL 4_20_2018.PNG

AAPL dropped over 4% today and pulled all the major indexes down significantly. I was honestly quite surprised by the sudden move downwards. I think there’s a good chance that Apple recovers within the next couple weeks as it bounces off the 165 level. I’ve highlighted a relatively strong support level in the chart above. Notice how many times Apple bounced off the 165 level. Apple will be reporting earnings in early May so be on a lookout for that. 

AAPL 4_20_2018 Weekly.PNG

The weekly chart of AAPL (above) looks very similar, with 165 being a level AAPL has bounced off of multiple times in the last couple of weeks.