I’m still bearish on QQQ for the next few weeks (and still have a short position from 175.35). I will quickly exit my short if QQQ closes above 175 again (complete gap fill). My target is still the 162-164 support area, which is about 4% lower.
A large part of the reason why I’m bearish on QQQ and the market in general is due to the financial sector (chart above). The XLF has retested the 26.5 low for the 4th time now, and I think we will break below support within the next two weeks.
MU, INTC, and other semiconductor stocks look like a good buy. SOXX tracks the semiconductors, so if you like the charts of MU, INTC and a few other stocks, you could just buy SOXX instead of the individual names.
I’ve analyzed MU and INTC below. I plan to take these two trades near the levels I’ve mentioned. I will update you before next weekend if I take a position during the week.
Fun Fact #53
MU announced a buyback along with an Intel deal day. As a result, MU surged despite the entire market being down! Read more here.
Note that the above price changes are for the last 2 days. I am still bullish.
I think QQQ has made a bull flag pattern. This pattern is formed when the price goes up vertically and then consolidates. I’ve drawn the flag on the chart above. The target if QQQ breaks out above 170 is the length of the flag pole, which is about 8-10 dollars depending on how you draw the flag. That means QQQ could reach 178-180 within a few weeks after breaking out over 170. The only concern is that the move upwards wasn’t on significant volume.
DIA, like QQQ, also looks quite strong. Since DIA broke out above the resistance level near 247.5, I think there’s a good chance DIA will bounce upwards from the 245-247.5 support zone. I’ve highlighted that support zone in the chart above. Also, please note that the volume on down days is significantly lower than on up days, signaling that buyers are still in control of the price action.
The SPY is doing the same thing as the QQQ and DIA. It is currently taking a break after a strong upwards move. I think the odds favor a breakout upwards, but if SPY closes below 270, I think we move significantly lower.
Speaking of bull flags, here’s the chart of BABA. Notice how BABA had a vertical move up on huge volume, and is now consolidating. The volume has decreased significantly as well which is a great sign. A break above 200 signals a lot more upside. The length of the flag pole is 30, so if BABA breaks out above 200, the measured move up would be to a price of 230. I analyzed the weekly chart of BABA in a previous blog post, and the chart also hints that a break above the 200-205 resistance level signals a lot more upside.
Thanks for reading, and I will see you Thursday!
Fun Fact #48
Samsung did a 50 to 1 stock split recently, and shares soared as much as 8.7% as a result. Read about that here.
BABA hit 200 on the penny this morning, but dropped a little bit to close the day. The daily chart looks so bullish that I’m thinking it’s a trap! Either way, I’m holding BABA for the long term (at least a year), so small fluctuations don’t matter much to me.
The key levels I’m watching for on the longer term perspective are a break above the all time highs at 206.2, and a break and close below 165.
Take a look at the monthly chart of BABA below.
Please note that this month is only half over, meaning the monthly candle you see on the chart now will certainly change. Either way, we’ve got something that looks like the rising three methods candlestick pattern.
Fun Fact #45
Companies do stock splits to “signal” to shareholders that their company is doing well. A secondary reason for a stock split is to increase liquidity (more easily converted to cash) by allowing people to purchase shares at lower prices. Let’s say you had $1,000 and wanted to invest in Amazon, but since the share price is currently near $1,600, you wouldn’t be able to buy any Amazon. If Amazon did a 10 to 1 stock split, making the share price $160, you would be able to buy 6 shares with your $1,000!
Although yesterday I was quite bearish because the price action was hinting that we would close red today, since we closed green, I maintain my bullish bias from 5/7. Google hit my “if wrong” target after jumping nearly 3% today.
I’m still skeptical on Apple’s current price action and think it will pullback to 180 soon, but the markets don’t care about what I think.
QQQ broke above a key resistance level at 167 today. This is very bullish, but beware that since everyone looks at the same chart, this could be a classic “bull trap.” Bull traps occur when bulls get baited into buying right as price reverses sharply lower.
Generally, I’ve found that if BABA drops when the market goes up, this is a sign that BABA will drop further. We will likely find out if this is true after tomorrow’s close.
Chipotle (CMG) has been trading in a very tight range in the last 2 weeks. Look for a breakout in either direction either above or below the rectangle that I’ve highlighted in the chart above. You can buy CMG on a break above 430, and short it on a break below 415. Or you can be aggressive and just short it when it hits 430 with a tight stop. I favor a downward breakout with a target of 390.
The weekly chart of QQQ is above. I’ve circled the lower tails displaying buying pressure, as well as highlighting a divergent high. A divergent high means that the index/stock made a higher high, but the RSI indicator made a lower low. That is bearish. However, we are still in an uptrend, so it’s generally a better idea to buy on dips instead of short selling high points.
The weekly chart of SPY is currently stuck between the support and resistance area. That makes the direction unclear, although currently, there’s more evidence supporting a move up.
Look at the weekly chart of BABA above. I’ve mentioned in multiple posts that BABA was a good buy in the 165-175 zone, and a good sell in the 190-200 zone. BABA is now approaching the 190 area, which represents a good price to sell at. However, I believe BABA can hit 200 on this move up before pulling back because BABA had good earnings last Thursday. Note that a break and close above 205 on the weekly chart would be very bullish.
Here’s the weekly chart of MU. I think MU is a good long term hold and represents a good swing trading opportunity here. As long as MU holds 45 on the weekly chart, I think we retest the highs near 60. Do note that we’ve made a divergent high. Like I described in the QQQ chart near the top of the page, this is bearish. As you can see in the chart, prices fell from the recent high.
Apple broke out to an all time high (ATH) after selling off hard in the last few months. Although Apple is up 13.25% in just one week, the chart hints that Apple has enough juice for another move up before pulling back. If we move up, I suspect a test of 190 since it’s a nice round number.
Chipotle (CMG) recently broke out upwards after releasing a very strong earnings report. Judging from the price action and moving averages, I think CMG will pullback to at least the 380-400 area from a weekly perspective, which is another 5-10% down. Of course, the upward momentum could easily carry the stock higher too, but my bet is down.
Thanks for reading!
Fun Fact #40
Did you know that France cut Cryptocurrency taxes by 50% a couple days ago?
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.
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.
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.
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.
Fun Fact #38
As a continuation from the last fun fact, the Chinese stock market is only open for 4 hours compared to the 6.5 hours that the U.S. is open. I think having a 1-2 hour break for lunch in the U.S. market makes sense.
For reference, I will be adding to my MU position for the long term (10+ years hold) as I believe the company is financially stable and highly profitable. The only concern is that the memory market experiences many boom and bust cycles, which could be devastating for the stock.
QQQ sold off a decent amount today, but tomorrow is the day that really matters. Apple will be reporting earnings around 4 PM tomorrow after the market closes. I honestly can’t see it going down after earnings, but that’s just me. I believe that the bad news has setup Apple for very low expectations, so any sort of good news will have the stock price sky rocket 4-5% to 172+. Also, I’m thinking a lot of people already sold before earnings.
Apple broke down through the 165 support level, but has now bounced back and closed right at that level again. This false breakout (assuming it holds), will cause the stock price to spike up as shorts panic cover.