Happy Halloween everyone. I hope you all enjoyed it whether that meant taking the kiddos door-to-door or attending a costume party, carving pumpkins or sipping some apple cider. There is always something for everyone.
Something that I feel I may have been neglecting in previous #SundayPreps and what may prove to be timely advice as we head into November, is the importance of identifying themes. In just a minute when we get into our broader market section, you will see that things are getting a bit extended up here. When things get this way, I am VERY hesitant to start new long positions. I even hesitate to take longs for day trades.
This is where themes become important. Even in a heavy tape, there will often be a theme or 2 where the momentum seems to persist. IF I am going to put my capital at risk on longs in a market like this, it will be a requirement that it is in a theme that has momentum at the time.
So what have been the hot themes in my opinion? Well for starters EVs caught fire last week with Tesla making new ATHs and Lucid having a MAJOR move. There has been interest in newer IPOs that have yet to make explosive moves and have decent technical setups. The crypto-space has continued momentum. And lastly, SPACs have come back in favor.
Knowing these things allows me to focus my attention to where the money flow should be and to avoid headaches caused by getting long stocks that are vulnerable to market pullbacks.
If you guys missed it, last Thursday we had our 6th episode of Method & Mindset on the @TrueTraderNET Instagram channel. And guess what!?! If you don’t have Instagram, ALL of the previous recorded episodes have now been uploaded to the TrueTraderNET YouTube channel as well! Also, don’t forget to check out www.methodandmindset.com if you haven’t already. Hours upon hours of free content from both me and The Wall Street Coach @KimAnnCurtin!
And of course, I would be a complete IDIOT if I didn’t remind you guys to check out G from a different SHE, @theGoose and his Midweek Watch. If you were to review his previous few week’s and compare his ideas to the charts, you would see just how much free money that guy is throwing in your face. His read on the market has been unparalleled lately and I have zero doubts that it will continue. Want to know why? Because it’s not luck. He has the experience and wisdom that allows him to make a consistent living from the markets. Put in the work, learn from this man, and one day you can too!
$ES / $SPY
Yes, we’re still extended on the monthly timeframe and if we decide we’re going to correct, we could have a decent amount of downside. But keep in mind that tomorrow it’s a new month, and that monthly 20sma is going to creep up a bit higher. The longer we go sideways, the more the move digests.
Now, are we moving sideways? LMFAO, NO!!! We are right back to cruising northbound. Even though we are getting extended on the upside, I really feel this action has been “grindy” at best. Typically when we see these kinds of grinds, shorts start to get upside down without really noticing it at first. Think about the analogy of the frog that gets slow-boiled to death. Oftentimes this leads to a speedup that will send us slightly parabolic. If that happens, I will be drooling over some of the short setups out there.
But if we were to roll over from here, there are plenty of levels of support. The first and most obvious is a retest of the recent breakout to new ATHs. Below that the major area that has my interest is the 20d/50d combo area. Would really expect buyers to be lined up down there.
$NQ / $QQQ
No different than the S&P analysis. The higher the better and the more emotional the better! But again, if we roll over from here, there are PLENTY of areas of support that I would look for buyers to show up at. The first is a retest of the ATHs break. The next is that 15550 area which lines up nicely with some areas I like. Below that is the 20d/50d area. But puhLEASE can we just rip higher in a para fashion for the love of everything evil!?!?!
Nothing much to add about the crypto-space. Everything acting beautifully here. One thing I would point out is that last Thursday we had a brief “flash-crash” flush on $BTC and while most people were probably panicking or trying to decide what to do, if you were PREPARED you KNEW this was a HUGE OPPORTUNITY!!! The sector is strong, the flush was right to levels of support, and it bounced back like nothing had happened in no time! Personally I snagged a really nice long on $MARA from this opp, but there were other names that gave other great trades. But ONLY if you were PREPARED!!! Make sure you know what you will do in any scenario by creating “if/then” statements.
Only real thing to note this week is how crazy strong Consumer Discretionary got and that I really think it’s due for a nice pullback. So you just might notice some short ideas from this sector in the SHORT SETUPS section. Wink Wink
Strong Stocks Looking for Continuation
This idea was on the #SundayPrep back in late September when we had the big volume and breakout. Even though that move eventually got stuffed, it never really broke down. Instead it continued to make higher lows and build the base. Now we are breaking again and the whole sector is hot. With Tesla and Lucid sparking life to the EVs, I’m looking to buy any weak open on this name. With Monday being a new week AND month, I’ve put the new pivots on the chart preemptively so that we can plan accordingly. I love how the weekly and monthly line up with fib levels as well as the recent daily level on the chart. And flush into low 27s/high 26s will have my interest. If this acts well, I think a piece can be looked at as a swing potentially with the first target area being 32s.
Very nice daily chart here. Just broke out to new highs. Was a 28.5m share IPO priced at 36. Thinking a pullback to that 48 area offers a nice spot to watch for buyers to show up. You have the quarterly pivot/weekly pivot/61.8% fib level all in that same area as well as Thursday’s HOD.
Recent SPAC that is in a VERY interesting sector; digital assets. Momentum is not dying so far on the name and as crazy as it may sound, I can see this one getting REALLY wild if this trend holds. I’m looking for 2 different areas. The first is that 32 level which lines up with the 61.8% fib level as well as Thursday’s HOD. If that area doesn’t hold, the next area that has my interest is 30. As well as it being a psychological whole number, it’s also a pretty important long trigger from Friday’s intraday action.
Notice how the fib levels remain very similar whether you use the after hours data or the regular trading hours. Just something worth pointing out since different market participants will be using different timeframes for their analysis, it’s nice to see them line up.
SPAC that has had a recent move up on increasing volume. Notice how after the big move up, all the dips keep getting held? This could be gearing for a major move and it is LOADED with shorts. Over 14.43 and we should see some fireworks. The idea is to be in from down here and that way you can be patient to let it work. I’m eyeing dips vs 12. So far the pullback to support has been on low volume which I love. If we see volume come in, I want to see this push.
Oversold Reversion Setups
Social media names have gotten crushed recently and with the market where it’s at, they might come down a bit more if we roll over. I think Twitter off that 48-50 area offers a great spot to watch for buyers to show up. The monthly 20sma will adjust Monday morning, which I’m guessing will be somewhere in the low 50s. You have your quarterly pivot down at 49.17 and next month’s S1 pivot will be at 48.32. Remember, I am in NO hurry to jump into these names until the market pulls back. In fact, my guess is that the market needs to pull back in order for these names to come down to these levels. This thesis remains exactly the same for both $SNAP and $PYPL from last week’s #SundayPrep.
Friendly reminder: ALWAYS ZOOM OUT!!! Monthly chart shows the significance of these levels and gets rid of all of the noise.
Weak Stocks Looking for Continuation
I know the ATR on this one is small, but if we break back below 17, we may see a momentum burst to the downside with some extended range. Would be willing to consider shorting any pop into the low 18s if it were to spike off the open on Monday. The new monthly pivot will be 18.39
PROTIP: If you have problems seeing short ideas because you are typically a long-only trader, flip your charts upside down (ALT+I on TradingView or put a “-” in front of the ticker on ThinkorSwim) and you just may have one of those “OMG” moments.
Now doesn’t that look like it might be setting up for a great long!?!?! LOL
I know this move down on the earnings report might seem overdone, but you have to remember where that Consumer Discretionary ETF ($XLY) is trading. If that sector is about to roll over and fall back to support, a name like this is very likely to have some more downside. I think any push back to high 108s/low 109s offers a pretty good area to look for lower highs and a great spot to get short this name. All eyes will be on the sector ETF as well as the $SPY. Remember, friends don’t let friends drink Starbucks. It’s for #BasicBishes
Another name from the Consumer Discretionary sector that just rejected the underside of the 20d on Friday pretty convincingly. I’m watching for this name to lose 82.5s and then short pops on lower highs. I know that the travel sector can be pretty cyclical and that there is a lot of traveling over the holidays, but this isn’t a swing idea and I’m not concerned about getting short for a day trade if technical levels break and the price action in agreement. The other way you could look to play this is a short on any spike Monday into Friday’s highs/20d with set risk over those levels. Personally would prefer to wait for the first scenario since what I’m really waiting for is the broader market and the Consumer Discretionary sector to give me wind to my back.
Overbought Reversion Setups
Typically this section is reserved for things that are getting to areas of being extremely extended. But as the broader market gets more and more extended without any substantial pullbacks, this section opens up a bit more to names that are more susceptible to the market. That doesn’t mean that I get sloppy and allow just anything in here. As always, the more extreme, the better.
Ignore the swing idea on here as that idea is complete and nothing left to do with it, but I like to keep old ideas on the charts so that I can look back at things later on. But this is really starting to speed up and get some real separation from the 20d. But keep in mind that it already pulled back since the initial big move up, and it clearly showed the ability to hold the psychological 1k level. That pullback may have been all it needed to trap a bunch more shorts and have the juice in it for the next leg higher. I am in no hurry to step in front of it and would actually welcome a gap up Monday and push even higher.
Next month’s R1 is up at 1231.61 which seems completely doable. If we get there in an emotional fashion, I would probably be getting pretty excited at the short prospect. ALWAYS remember that we don’t need to be first in, especially when there is so much meat on the bone. Wait for some lower highs and a way to have defined risk. And remember, this idea isn’t for 10, 20, or even 30pts. The idea here is to capture a massive fade that could easily be over 100pts. So don’t be that guy that is busy covering as soon as the trade starts working. Have some patience for exits the same way you should have patience for your entries.
This name is getting a bit frothy up here, especially when you look at what this stock has historically had as extreme moves. Thinking there is a real nice fade in here and would love to see a push towards 83s to get it looking even more juicy. As always, wait for the author to tell you it’s time instead of playing guessing games the whole way up and ending up with more cuts than your zombie costume from tonight.
I’m throwing this name in here this week because I’ve been getting a TON of questions about the name. Mostly people wondering how can something get so overdone and not give the big fade yet? Well how overdone does this thing really even look after looking at the last 2 names on this list? Are we getting extended? Yeah. But SHOULD this thing roll over up here? Really doubt you can make that statement with any sort of confidence. It’s already pulled back twice in the last few weeks and both times put in higher lows on the daily and then heading straight back to new highs. Here’s the thing, you need to identify what timeframe is in control. Even though we may look extended on the daily chart, if you take a look under the hood you will quickly realize that it’s merely holding trend on a different timeframe.
Notice how well this has been just walking up the 120min20. Both times it tried to pullback and it began to look like it may roll over, it ended up creating a new continuation trigger higher. This is completely controlled and nothing about it looks extreme. Remember, when you’re trying to catch a “reversion to the mean” trade, our edge lies in it’s extremeness. If something isn’t extremely extended, then there is zero reason that it SHOULD fade. Could it? Of course. But SHOULD it? C’mon.
Now, all of that preamble was really just so that I could explain that I DO think there is a trade setting up here. Once we DO finally lose that 120min trend and it’s not able to reclaim, then it should seek the next timeframe up’s trend. That would mean we could see a pullback to the 20d. But personally what I would WANT to see is this thing squeeze out higher. And sadly, when I start to get a TON of DMs about “why won’t this stock die?” or “how can this thing keep on continuing higher” it’s usually a pretty good indicator that there are a lot of upside down shorts in the name. And when that happens? You guessed it; El-Sqeeze-O.
The next monthly pivot starting Monday will be up at 224.77 and then 254.69. The annual pivot is up at 223.43 as well. So my FIRST area of interest would be up there around 224-225. If shorts are hurting here, they will be screaming up there. And when they all scream “UNCLE” and bail, well that’s when it’s the best opportunity for us to step in and BEGIN our short.
That’s it from me for this week’s prep. Let’s all remember to focus on risk first, and PnL….
…ummm, never. Capital preservation is E V E R Y T H I N G