Over the weekend I tweeted a series of videos from Tom Hougaard’s Trading Psychology presentation at the CMC.
First, I am NOT affiliated with Tom or the CMC in any way. What I LOVE about this talk is he drives home what we talk about at TrueTrader constantly. To be a profitable trader you must be uncomfortable. You must shut off fear. You must do what everyone else is NOT doing.
Our members already know this, but we take advantage of emotional and irrational moves. Basically, when everyone is buying.. we’re selling. And when everyone is selling, we’re buying. Our system helps identify the max pain or greed and we zig while everyone else zags. I wish I could tell you it’s easy but it’s not. Most people are wired to move with the herd. We help traders get comfortable being a lion among the sheep.
Kim Ann Curtin (The Wall Street Coach) and I started a new instagram series called “Method and Mindset” where we coach real traders on both the technical and the emotional aspects of trading. Together we team up to pack in as much value as possible for our guest. This Thursday we’ve got another one and I really hope you tune in. Here’s a link to our last one.
Kim and I also put together a website with hours of extremely useful video lessons to hone in your method and mindset, completely free. Check it out at www.methodandmindset.com
$ES / $SPY
So we finally did it! For the first time in over a year, we broke the lows of the previous month. Always keep in mind that that alone is not enough to cause concern. Remember, it isn’t the pullback itself that matters. It’s what happens afterwards. I’m fully focused on the weekly chart. The first challenge for this coming week is to see if we can break back above last week’s highs. If we are able to do that, can we get back to ATHs? Or do we begin to roll back over and have the possibility for putting in a lower high on the weekly chart? If attempts at retaking highs start to fail, then we may have some cause for concern. But let’s at least give the author(price) time to tell us before we start to get all bearish. Bulls would want to see pullbacks towards the 4400 area hold as support. I do still like that 4364 area as well. As far as levels of resistance, the 20d/monthly pivot will be the first area I’d expect the bears to heavily defend. Above that is the quarterly pivot at 4512.25 which is also the area where the recent correction began from.
$NQ / $QQQ
Even though you will see me using trendlines in my charts, I always like to have a disclaimer that for me, trendlines are merely rough guides. I’m not delusional enough to completely ignore all the prior trendlines that could have been drawn that all would have been broken a dozen times over, only to be replaced by a new trendline when it made it convenient for whatever narrative you were trying to see. That being said, we have definitely pulled back to a pretty interesting area in relation to the trendline we have now created.
What’s more important to me is that after the pullback to these levels, we got a nice little reversal setup with the higher lows on the daily chart (highlighted by the yellow circles) that were then able to push back over 15163.25. To me, that makes last week’s lows pretty significant.
Same thoughts go for the Nasdaq as went for the S&P. If we can reclaim last week’s highs, do we then push back to ATHs? Or do we start to roll back over and possibly begin creating a higher timeframe lower high on the weekly chart?
Bulls will want to defend the 50d/quarterly pivot area. If they can’t hold there, the next spot I would watch for them to show up at would be the 15k round psychological level which is also the monthly pivot/annual pivot area.
Bears will be looking to defend the 20d. Above that, I would definitely expect to see them do battle up around that 15550 area which is where the recent correction began from.
Last week in the Sunday Prep we pointed out that a break above 47400 that didn’t get back to the 53k area but instead rolled back over and then lost 42830 then to “look out below.” Well, that’s exactly what happened and the break of that level saw over 3k points more of downside. Bulls have some work to do here because at the moment you have all 3 major moving averages hovering menacingly overhead. That 45k area looks to be highly probable resistance. Below, I would expect support to be strong down at last week’s lows.
What a frickin’ week for Energy!
It may need to cool off after having quite the run, but I think pullbacks now are buying opportunities. If the $XLE were to pull back to the 48-49 area, I would be looking for strong energy stocks that were looking ready to get a leg higher.
Strong Stocks Looking for Continuation
Earnings on Friday sent this big guy ripping back towards ATHs. 50% retrace of Friday’s candle puts us right into that quarterly pivot area. I would be interested in buying some early weakness in the name around that spot. This is the kind of chart where if the trade works and we close the day somewhere close to highs, I would be very inclined to swing a portion of it.
Another from the energy sector is Pioneer Natural. Decent volume and good range. We had a nice breakout, nice flag that busted above. We retested levels and reclaimed and kept going. I want to see this retrace back to the quarterly pivot (159.75) on a weak open and watch to see if buyers show up.
Airbnb probably wont be a Monday trade. This feels more like a Tues, Wed, maybe even Thurs trade. I want to see this find near-term resistance right here before looking for a pull back. I want to be buying this as close to the 20d SMA as possible on a pull-back.
DoorDash. May not get this on Monday but I want to get this around the 20d SMA as much as possible. If the 20d creeps up too much I’ll want to see this against last week’s lows (212.80 area). This name has been on a tear lately and I think it has more to go so I want to make sure I’ve got my eyes on DoorDash.
QuantumScape. I want a shot at buying this around the 24.00 to 24.70 area on a retest. If I get involved in this and it starts working I may have both a day trade AND a swing trade. That 24.50 area is both a monthly pivot as well as a retest of the breakout area.
Palantir Technologies is another name from last week. It broke out beautifully and the chart is intact. The pull-back was deeper than anticipated (but that came with the market imo) but it’s still strong and I want dips to buy. I’ll be looking for dips to buy.. like the 20d SMA but not sure I’ll get it. I may just start buying on dips risking against previous lows. Make sure to join TrueTrader so you can keep tabs on how I trade this in real time in the chatroom. I do not want to miss this.
Oversold Reversion Setups
FedEx. I think if I’m really lucky we’ll get a test of $200. I dont know if we’ll get there but it would be a gift. Now, if we FLUSH EMOTIONALLY (not a grind) to $218 I’ll probably take a shot there and manage risk.
The other way I might play this is if it turns. If we put in some higher lows I’ll have something to risk against.
Weak Stocks Looking for Continuation
Target. What’s interesting about this name is that while the market was rallying Target just floated down with the 20d SMA. If the market is heavy next week, this name could fall. I have an alert under 239.63 I may join the trend. If we crack that level I’ll be looking to short pops. I do not plan to short pops in to the 20d. If we do get an EMOTIONAL pop into the 50d I’ll look to fade that. But that is for a quicker style day trade and not the bigger picture type of idea that I am discussing if we get the breakdown.
Best Buy. This one cracked last week. This is the same sector as Target. I am looking for a pop back into 106.50. If it runs past that I’ll look for a fade against the monthly pivot at 108.50.
How I choose which ideas to focus on. Hint: I watch the broader market.
Remember the levels in the ES / NQ… if the market hits those areas of resistance and sellers appear I’ll revisit names like Best Buy. If the market comes in and finds support at levels, then I’ll focus more on longs.
Caterpillar. This is bouncing with the market. This chart is broken to me. I want to short pops back into the 20d, monthly pivot, or quarterly pivot ($200 level).
Roku. I hate Roku and love to have it on my short ideas list. This chart is behaving well for bears. Breakdown, pop-up, stuff. Any pop into the 20d and quarterly pivot (~$335) I’ll be shorting. The way it behaved on Thurs/Friday I feel like a lot of people bought this on that gap up. If this opened up sub 316’s I may just look to short pops.
I would NOT like to see this go back above $340 before going lower. That might indicate a reversal in which case, I don’t want any part of this.
Overbought Reversion Setups
CF Industries. If you’re thinking this doesnt look like the normal Overbought Reversals you’d be right. I still like these since they had such big moves up and they’re nearing some nice resistance levels. If these SLAM straight into these highs WITHOUT a pull back first that will be a strong short for me. If we see a weak open Monday I wont be interested in this name.
Expedia. This is the same idea as CF. If we see a gap/emotional move into the $178 area then I think we’ll have a great short on our hands. I’ll grab a few points and be done with it.