Trading the stock, bonds and precious metals markets over the last three weeks have been exhilarating and frightening at the same time. While not for the faint at heart, if you must put money to work, understanding the different levels of risk and positioning accordingly will see you through this madness.
Summary
This is a response to some of the traders in the trading room last night.
Mikey and I are planning a Traders Spotlight to discuss his setups as well as mine and how his style meshes with what we do at TCP. We understand people probably got chopped up these past few days, especially today with SPY opening up 12 (+/-) points higher, only to lose all 12 SPY points, then reverse and move back up 14 points to the highs of the day at the closing bell. Reminds me of 2000 dot com days where CSCO, INTC, and ORCL had 10-20 point moves intraday.
I MUST REPEAT this is a very volatile market and may be one to sit out. If you have to trade make sure you have a plan.
SQQQ is an example, for the past two weeks and more recently, we’ve been “selling covered calls at HOD buying them back on dips”
TBT bonds playing the fade in TLT – swing w/ trailing stop
DLTR swing trailing stops, and you know the reasons why we are trading them. Cash flow while minimizing risk. Covered calls help.
Our longer-term retirement accounts are NOT day trading vehicles; those are in the #vinnys-current-trades channel. We reduced AGG.
Finally, I spend 4 hours minimum on the video and 4 hours on the watchlist every weekend. These tell you exactly what I am planning for in the week ahead, then I update you daily with a BLOG POST.
The only thing left to do is enter and exit trades for you. I mean that in a nice way, with a touch of sarcasm.
I understand if you’re a little shell shocked after recent action.
Experience is your friend! @Heartpumper77 , Mikey and I hope to help you on your journey.
I’m probably one of the least emotional traders you’ll ever meet, so I hope to teach you that as well as best practices. I know Mikey will too.
As we watch futures fade from the closing highs, these are our thoughts.
If the market indices are to hold this level, bulls need to see lots of block trades and TICK cumulative rising. That will show institutions are active.
We also need to see VIX falling.
Wednesday: As always, we won’t do anything until the Opening Range is done, 10:00 ~ 10:20 AM. Profit-taking and stock/bond market assessment are done from 9:30 ~ 10:20 AM. The reason is, we want to see evidence of what institutions are doing for the day, so we wait.
When volatility is high, we minimize positions. We trade quality and we need to exercise patience.
The 9/21d crossed in a bearish direction Monday, February 24, on a gap down below the 9/21d over three weeks ago. That changes our strategy to tactical as SPY isn’t trending.
Tuesday close presented a hammer. 273.45 is our lower reference point.
The pivot high reference point at 313.84 establishes our Fibonacci targets, illustrated with blue shading. The 200d is where institutions kept price action for 5 trading days so that is another level of resistance overhead.
RSI and MACD histogram is making a higher low. These two need to continue higher, as a function of price action.
Crude Oil – A Caveat
Black gold is losing its luster as more alternative energy sources become more ubiquitous. That said, a bounce in crude and a resolution between Russia and the Saudis could help print a floor in crude. If SPY/CL moves higher today we might consider a long setup in UWT, USO and/or CL.
Crude futures are lower this morning, shy of Tuesday highs. A rally here might get bought, so we will watch for entries on the dip. UWT USO CL
Note the last time STDDEV (lower panel) hit this level and reversed. Thats what we are looking for, mean reversion. A move higher in crude is a positive correlation to equities, so we need to see a bounce.
RSI and MACD have not turned on this weekly chart. Watch the /CL futures, daily, 5/30/60-minute charts as well for early signals.
In the back of our minds, we are thinking, “if AAPL rallies its good for bulls, however, if AAPL loses it we’re most likely headed lower.”
Those of you in the trading room who took AAPL on Monday and held through Tuesday should be watching the 9ema (287.87) and 21d at (296.55) as overhead resistance levels. A move above 304.00, while not anticipated, would be a huge boost for the bulls.
Bonds – The Other Caveat
We’re looking for a fade in the overcrowded bond trade. We are trading TBT and plan to add should price action continue to march higher this week. Fibonacci retracements at 38.2 and 50% are targets. The 9ema and gap will likely encounter some supply as well.
RSI is oversold and improving. STDDEV (lower panel) is at extremes.
Futures are bouncing at 1:00 AM Globex lows. And, a range since Monday is developing, with lows at 2700 ~ 2725 and highs at 2875. We are watching for a break in either direction while monitoring the charts above for confirmation.
Be patient. And, if this market is too much, set back and relax until the stock markets start trending again. It took three weeks for the stock markets to get here and will likely take three months to resolve.
Join us today in the trading room for our LIVESTREAM broadcast
during market hours, as we navigate the current environment. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.
As always, the use of technical and fundamental analysis is encouraged in order to fine-tune entry and exit points to average seasonal trends.
These mentions are stocks that we may or may not decide to trade as outlined in the watchlist. Always use a stop.