I have been posting my sentiment to the long side past couple of weeks and my sentiment is helping us to stay on side of making money mostly and sustaining net growth that stands at >200% in past 94 trading days in 2019.
Last two days have been roller coaster. Thanks to presidential tweets, and theatrics of trade-war with China. Before I get to charts, let me express my 2 cents: China is not paying tariffs, we are paying it in The United States of America. I am amazed how the president is "able" to make such statements while taxing his own people. I have been saying it since the start of trade war that China will not buzz the way administration "very egoistically" anticipated. This helped me to trade most of the time with profits. End of the day, my common sense tells me, nothing will happen with all empty promises of "constructive discussions" or "threats/tariffs". Tariffs mean nothing in broader picture so if there is no deal, does not mean markets will crash, and if you consider China as a nation with some self respect, it is not going to buzz with threatening approach, so sell the "positive" news. Charts are still the king and queen of trading for me and this theater is only making process faster to go from one level to another.
Markets' technical and trend remains to the upside. So I am going to keep trading with "buy the dip" strategy and ignore the trade-war drama. UNLESS key levels on charts are broken and remain broken on daily closing basis.
First things first, my favorite chart at this moment is Russel/Small Caps. /RTY has been trading with technical beauty and is still the one and only left that has not made new all time high. Now, that itself is not a great point in direction of long side but what is attractive to me is that it has been consolidation at 61.8% level and is getting more and more primed to test 78.6% at some point. In this process it has built a solid base at 61.8% level.
China-Trade-War tested this level (good quality control process) and /RTY held firm at 61.8% level closing with a beautiful daily candle. On H4 chart, not even a single candle is closed under 61.8% level and 200 SMA is intact and in uptrend, with significant positive divergence.
/ES my focus has remained on the channel and it has served us well in taking shorts on volatility and long with SPY with some handsome gains. We will see next week if this channel remains intact or price break out to the upside.
I remain biased to the long side unless technical parameters are broken for the long side. With every tweet/news that brings market down, I will buy the dip and then take profits on my targets. Having said that, I am also going to keep my trade size smaller than usual so that if I am wrong I do not lose much. Our approach of trading small and trading less has given us consistent growth so I am not going to change that.
In my last blog ( https://urlzs.com/2raQ ) I have mentioned $BAC and $AMD for long and $TSLA for short. All three stocks moved as expected and are approaching back to same key levels.
However, for the next week I am adding another set of stocks. One I am looking at is REGN. It has been drifting down for some point and now at a key level, from where reversal may mean a lot. REGN if trades above 346 has the potential to go back to 360s rather quickly.
TSLA is now back into my focus for long if it trades above 256.61 for a long set up. On Thursday we discussed a potential long on TSLA but somehow we missed to take the trade. One of the main reason was that I preferred to minimize my trading on Thursday and Friday (more on this in my next blog on indices). For TSLA 270 now will pose a problem as resistance.
And the last one I would like to mention is WMT. We had a very good trade on WMT last week, and now it is ready for another one. If WMT trades above 103, it will be a good long set up with a target of 106.
Market showed turbulence last week, we traded very light and I have tweeted earlier in the week that we will need to put patience and discipline on steroids, and it certainly helped as our T2.5K and T5K total gains were protected and indeed moved to new high.
The past week after robust move witnessed some chop that was necessary. Mostly I stayed out of active trading but remained engaged in actively watching the tape. It is important to switch to the bigger picture when moves are limited and the trend is not obvious in a couple of days' range. So let us start with SPX and /ES monthly chart with Fibonacci extensions. We are in the vicinity of all time high. If we see a new all-time high then 3076 is the next target. In that case, a clean set up will be to test 3076 and pull back to 2947 for a swing long trade.
Moving to short term to an H4 chart for last one month, I see two important volume support areas, one at the 2915ish zone and one at 2890ish zone. To the upside, 2990ish will be a reasonable target. In the context of 2990 we need to see low 2940s become as support.
I am in particular interested in Russel /RTY to the long side as it has a much tighter set up and showing strength for the past few days.
It looks even tighter for H4 chart.
/NQ has held above previous all-time high, after making a new one. /ES and /YM are looking at the new all-time high, and /RTY is coiled but at the same time /RTY still under 78.6% level and supply zone at 1690-1710 band.I do not and can not predict where the market will go but the analysis reveals strength all around and an uptrend is intact on daily charts. However, we are going through earnings season and some big names such as AAPL and GOOGL are due to release earnings. This can create turbulence in the short term.Last week our net gains remained only +5-6% but we remained in green territory. I am more cautious about protecting gains than looking for killer trades.
In my previous blogs, I have expressed my sentiment to the long side. On March 30 my blog on tech sector shared my bullish stance, and on April 7 I have emphasized that trend and momentum are to the long side.
And following my analysis we have been long on /ES /NQ /RTY and locked massive gains, notably 150+ point in /NQ long fetching us up to $3000+/contract gains. Our T2.5K and T5K Total account value also hit high for 2019. All winners and losers are listed here: https://t.co/FGbvA4FCev
Now at ATH we are in full cash position and watching if price can sustain this move, and offer us new support levels and new set ups. Now it is anyone's guess regarding where do we go from here. Today /RTY showed strongest momentum, giving us solid gains in short time, but still has not made new ATH. On Wednesday BA will report earnings before market opens and that may influence markets heavily. Then AMZN April 25, GOOGL April 29th and AAPL reporting on April 30th. So next few days will be wild and unpredictable. Once major earnings are done, we will have better idea of support levels in short term. Traders who have been following me for a while know that one thing I am good at is in "not trading" but watching :), Plus I do not trade earnings. So It is possible that I will be very busy in watching tape than actually trading in next 5-7 trading sessions.
In coming days I will be active in blogging about AMZN GOOGL and AAPL with a focus on price action on day after respective earnings. So stay tuned.
Last week was not an easy week for trading. Some consolidation was (and is) in progress. Some of the stocks are more ready than others. AMD traded in a very tight range and if it can break above 27.9 this week, it will be a good long set up.
I am not super excited about financials in general but BAC is near a level that if gets broken can go much higher.
TSLA is under resistance area and it is all about if it can go and hold above 275 or it loses 270.
Our patience has saved us a good amount of money. We have been trading small and last week traded very light. Current level of price still warrants caution. At the very least we will watch how Monday opens and closes, to get some sense for the rest of the week.
First things first, $ES is well above 78.6% that I have been talking a lot in the past and was my basis to take many long trades. 2820s price zone was the key and if there is any deep pullback this will be the zone to pick a fight for long trades.
Now let us look at short term charts. 2885 should hold short term and it does it will be an evidence of a strong momentum. 2912 will be a short term resistance, and should be
watched closely what kind of price rejection (if any) arrives on the deck. Overall current structure will need to offer deeper pullback for a good quality long trade. Otherwise we may have to just sit and keep watching the rise. If ~2912 is crossed and held then I have no doubt we are looking at all time high this week.
So, bottom line, if we see a pull back then 2885 is first level to watch and may be spot to take long. If 2885 fails then I would expect chop between 2865-2855 area. If 2860s fail then we should be ready to sit patiently and wait for 2820s for swing long trades.
On the short side, I do not see any weakness yet. Momentum is to the long side, so is the trend.
Let me put some sense into the title first: We do trading because we want to be rich. Period. No question about that. However we all approach it differently. Some traders trade their "Set Ups/Mantra" regardless of profits and losses (even do not look at Profits and Losses while trading). Then there are traders who have set amount of money % in the mind that they want to make/lose in each trade, and have xl sheets up and running often, these are the traders who trade "Money". AND then there are traders who unconsciously, without even realizing this, trade out of addiction, and seek adventure. They can not control the urge to get into a trade. They are excited when opening bell rings and they are not very happy when closing bell rings. They wish all the time that market is open 24/7. These are the traders who are just trading their "Madness".
After messy years of greed and fear if I look back at the starting phase of my systematic "ZEN" trading, I started trading with 1 $SPY call in the money with next week expiry in my $10k account. This helped me more to learn about trading tools and the platforms and more importantly about how do I act and react. We do not realize but for all of us a BIG challenge is to take small trade because profit size is not attractive. And in many genuine cases commissions are too high to make it even worth it. BUT it needs to be that way. If you recognize that you are in the early learning phase (we all are in learning phase at different stages), certainly you have to get engaged with real trading. There is only so much that you can learn and do by reading books and watching YouTube videos. Simulation trading where you are given $200,000 of fake money will do some good but real battle is real battle. So, it is, in my opinion, critical that you do start trading with your own real money but keep your trade size as small as needed to keep you calm and free from anxiety and excitement. Excited and worried brain does not learn anything. When you have neither anxiety of potential loss to get your account killed, or an excitement to buy a new car with your profits, then all that is left there is your set up, your reasoning and your objectivity about WHY. And you are at the path of trading your set ups and refining them i.e. your mantra to success and wealth. Remember "MONEY" will come and go during trading. There is not a single trader in the history, and will never be who only makes profitable trades. Your Set Ups that work and that can be executed by you, will stay and will be the key to your growth. Think in this way - If your tested setups and you yourself are working without flaw, no matter if you start with 5K or 500K, you will grow. But if you trade money without any tool and without any idea of how will you act and react then it does not matter if your account is 5K or 500K, soon you will be out of business. Remember - Green trade is not a "real gain" if you feel euphoria with it. it is just money that has "come and will go". Red trade is not a "real loss" if you took it calmly, and moved to the next trade without any feeling of revenge because It is just money that is "gone and will come back". So if you are trading for that Euphoria you will certainly get it few times, no matter if you have good set up or not, because even a broken clock gives you correct time twice a day but be ready to pay the cost in trading for that kind of madness.
I have learned a lot by making mistakes and blunders. I started trading when AMZN was a $30 per share and the company was selling books and only books. I have been through fever of Pennystocks, OTC, Pinksheets etc. I wish I knew the importance of getting a mentor, and learning the technical process very early in my journey. I loved patterns but I had no clue how to use them effectively. But what helped me most was that my passion for patterns quickly took my focus away from the money and more on to finding what was working and what was not in terms of chart patterns. And this was a game changer. I hope that you get to that level as quickly as possible and start your journey to richness beyond money. Just my few weekend morning thoughts. Another blog on markets will come soon.
For weeks I have been stating that I do not see any bearish set up in bigger picture. Time and time again we have seen cross and hold of 78.6% Fibonacci level in /YM, /ES. and /NQ.
We also see now clear uptrend in past three months period with a good volume support. XLK shows good strength to the upside as well.
If we look at individual components. AAPL after retracing from 61.8% level, held 50% level, and after couple of sessions with a narrow range trading, is trying to break above that consolidation range.
AMZN and GOOGL are also at good support levels and looking to the upside.
So to summarize, I remain cautiously optimistic to the upside. We had multiple successful trades to the long side with few good ones on the short side. I will remain open minded if opportunities with short set ups arise, until then I will keep my strategy to buy dips and break outs.
We completed our first quarter of 2019, with gratitude to the kindness of Mr./Ms. Market and are very thankful for a solid growth.
Keep your analysis simple, charts clean, and execution disciplined.
Let Us make Few Trades But Good Trades. Happy Trading.
On daily chart what we have seen this week is the failure to hold above 78.6% Fibonacci level that is also in the price zone that has been October, November and December in 2018.
However we now have a broad volume support. 200 SMA on daily chart remains flat giving no long term trend. Past 4 days price has found support at 21 SMA and even after testing below 21 SMA daily close remained above 21SMA. So overall picture is messy but I do not see any bearish set up. Even if price has to visit lower levels, I expect it to be in a very choppy style (sans news).
Two biggest components of SP500 the Technology and Financials are pulling it in two different directions. What I mean by this is that we have witnessed some strength in XLK but XLF has been very weak with much less support.
So in coming days if banks can pull it together and gain some momentum with technology sector holding its gain, we may see a good upside move in coming days. On the other hand AAPL GOOGL MSFT are sitting at support levels, and if that support is broken, with banks still in spiral down then I am very certain that we will be looking at 200 SMA level test and may be even 61.8% level shown in first two charts.
On Thursday and Friday we took two futures trade fetching up to $2000/contract till last exit, and following two charts summarize them.
The idea behind both trades was as simple as it can get. /NQ trade was taken based on daily chart, where it was back testing 78.6% level and did reversal. For /RTY it was 61.8% on daily chart, where could not reverse and broke down to the down side. This was the strength of pure technical analysis and importance of Fibonacci levels.
Moving forward /ES closed week under 78.6%, /NQ just in the zone of 78.6% and /RTY is approaching 50% Fibonacci levels. Edge to either of the side is not clear cut but these levels will act as good guidance posts to take trades.
You can add your favorite tools to these levels such as momentum indicators to further point out the entry levels for trades. but price between these levels I would see as non trading zones, and more of noise in next week.