Happy Sunday, Traders!
Alright, I’m back in the U.S. after almost a month of traveling and spending quality time with family and friends. I’m feeling refreshed and revving to get stuck back in.
So, without rambling on, let’s get right into it, traders. I want to start this week’s watchlist and review with a quote by famed economist John Maynard Keynes.
“Markets can remain irrational longer than you can remain solvent.”
Why have I put this in here? Well, as you probably already know, the market / SPDR S&P 500 ETF Trust (NYSE: SPY) closed the week up almost 6%. 6% up in a single week. That’s not a common occurrence, traders.
From chatting with other traders and gauging sentiment and opinions on X (Twitter), many traders got burnt last week by fading the market because it was simply up too much.
Before we get into ideas and plans, I am dropping the above quote as a reminder. The market doesn’t care what you think. Often, If I think I can outsmart the market, it will quickly teach me a harsh lesson.
So, here’s a reminder for you and myself: Respect price action, be open-minded, seek edge and confirmation.
A Snapshot Review of Last Week’s Ideas
I won’t spend time on the bounce idea in the overall market or, more specifically, the QQQs from last week. While it played out, and it’s a brilliant opportunity to review, it’s been covered and reviewed by many online already.
So, let’s briefly go over the idea in HUBC and understand it better. I outlined multiple different outcomes and setups, and the final short idea I had played it perfectly. Please refer to last week’s watchlist to better understand my thoughts on the stock and setup.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
After breaking above resistance, the stock failed to base above and, within just a few hours, traded back into the range. That move confirmed a false breakout, a.k.a Stuff Setup, and trapped longs. This is one of my favorite short setups.
Per the watchlist, once the stock confirmed the stuff and traded back near the low end of the range, it provided multiple pops / lower highs to enter the short swing, risking to $0.80, and a couple of days later, the stock traded into the desired target area.
A Pullback in the QQQs
While I was long-biased last week after I felt the market was a bit stretched to the downside in the short term, I can’t help but feel the same in the opposite direction now. QQQs were up almost 6.5% last week and have traded close to an important resistance area.
This is a highly conditional idea and one I will only act on if it matches my criteria and provides a well-defined level to risk against.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Sticking to its trend of making consecutive lower lows and lower highs, I am looking for the QQQs to confirm a lower high around $370 this week. If QQQs consolidate near this level, then there is no trade for me, and of course, if it breaks above $370 and holds or above the previous lower high of $373.73, there is no trade, and the idea is not valid.
However, if the ETF pushes near the $370 area and fails intraday, then I will be on the lookout for a possible entry. A failure could be a new low of day and then holding under vwap, for example.
Things to keep an eye on for added confirmation and context: performance of top holdings of the QQQs (AAPL, AMZN, MSFT), relative strength/weakness vs. SPY.
In the event of a confirmed lower high (on the daily), I would look to go short, risking against the high of the day (the lower high) and targeting a 50% retracement of the recent move (using $350 as starting point and $370 ending point), so around $360, for a multi-day swing trade.
Side Watches: EJH and IBRX once the trend breaks
Two names that have the potential to develop into solid 1 – 2 day swing shorts are EJH and IBRX. Both are fundamentally different companies, but from a technical point of view, I am looking for something similar to get short.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
For IBRX, I am looking for the stock to fail on a breakout attempt over $4 or to break its uptrend and $3.5 and provide a lower high entry on a higher time frame to get short versus the high.
This is highly conditional, and I will only enter if it sets up per the above plan. Otherwise, I will avoid it altogether as it might chop around / squeeze out. My main target would be a move toward previous support at $3.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
EJH is interesting to me because of the chart pattern and sustained volume. This reminds me so much of what OTC pumps look like; a steady and tight uptrend that eventually breaks and crashes 50 – 90% in a single day. Now, I’m not sure if that is possible here, but from a technical point of view, it sure looks like it to me.
Therefore, I will have price and volume alerts set in this, looking for a $2 break and/or heavy and consistent volume to enter intraday, which might signal that a liquidation play is about to occur. My target for this would be a move toward $1 within a day or two. Upon confirmation, I will short risking to the high of the day. I will have hard stops, as always, to avoid getting squeezed in the event it traps and potentially uses short covers as their exit.
