Happy Sunday, Traders!
I trust you had a great weekend, and I hope the past trading week brought you success and continuous growth in your skills and insights. As we enter a fresh week, a realm of untapped opportunities awaits – Let’s go!
Reflecting on my ideas and thoughts outlined in the previous week’s watchlist, I was in sync with the market, particularly concerning my trade plan for NIO and views on several tech stocks that had become overextended in the short term. My trade plan for AMD did not trigger, though, as the stock did not break above resistance, so no trade was placed.
My focus will be on patience and stock selection for the upcoming week. Summer trading vibes are still strong, and I will need solid, absolute confirmation before hopping onto any swing trades. With the current trading volumes, the correction experienced last week in the market, and where the big picture trend stands for the overall market, it’s all about playing it smart and steady. Less is more right now.
From Last Week
NIO
Trade plan and thoughts from last week’s watchlist: “If I see the stock put in the lower high, I will look to enter the position short, around $15, with a stop placed above the most recent lower high, explained in the above paragraph. So, if the stock pops and fails at $15.30 and trades back to $15, I will get short near $15 and place my stop at or just above $15.30.
*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.
My first profit target for the short position would be $14 – $13.80, the first area of support I see on the chart in the short term. I would look to sell close to half of my position there, which would cover my risk and lock in profits. I would also lower my move stop to $15 or trail my stop to 1 ATR above the current price, depending on the price action.
To cover the rest of my position, my lofty price target, with a 1-week time stop placed, is the rising 20-day SMA, near $12.30. It’s a lofty target, but sometimes it pays to have imagination. As mentioned, If the trade materializes, I will cover half into $14ish and most likely move my stop to either $15, thereby locking in profits and taking risk off, or trail my stop to 1 ATR. If the idea triggers and the trade is placed, my timeframe for completion would be about five trading days.”
AMD
Taken from my watchlist last week: “After testing the consolidation support, near $108, on Wednesday, AMD failed to spend time below it and snapped back towards the resistance of the consolidation. This gets me thinking; a fast move higher comes from a failed move lower.
*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.
So, I am looking to get long AMD for a short-term swing trade if the stock can break above $120 and hold above $120 intraday for over an hour, long enough for me to have confidence that resistance has been broken and might become support going forward.”
New Swing Ideas For This Week
Upstart (NASDAQ: UPST)
Upstart Holdings, Inc. is a prominent fintech company specializing in lending services within the US. It operates alongside its subsidiary companies and utilizes a cloud-based artificial intelligence (AI) lending platform. Established in 2012 and headquartered in San Mateo, California, Upstart Holdings had facilitated over $28.6 billion in loans by mid-2022, with over 75% being fully automated.
UPST Fell Off A Cliff Last Week
The company closed the week down almost 45% after reporting earnings on August 8. The numbers weren’t that bad, but the guidance spooked investors.
In the latest quarter, revenue dropped by around 40% YoY to $136 million, with partner loan transaction volume down 64%. The company recorded a net loss of $28 million, a slight improvement from the $30 million loss in the same quarter last year and an adjusted net loss of $5.4 million. However, these figures showed a slight increase compared to Q1 2023. The contribution margin reached a record 67%. Investors were more concerned about the upcoming Q3 projections, where revenue was predicted to reach $140 million, a slight increase, but with a forecasted net loss of $38 million and a contribution margin dropping to 65%.
The near 45% drop this week and slight price stability discovered on Friday present a unique bounce opportunity for a short-term trade.
My Trade Plan
Important to remember that I’m not looking for an investment entry here. I am looking for a relief bounce entry and trade; therefore, it is conditional and specific, and I will only react if it materializes.
*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.
So, to enter, I will want to see the stock test Friday’s low and immediately find support, break away from that area, and confirm buyers are stepping higher = I enter the trade around $33. Another scenario might be a quick dip below Friday’s low and reclaim, indicating support and buyers stepping up = I enter the trade around $33. I will place my stop around last week’s low, $30.82 if the idea confirms and offers me the entry I am looking for.
Alternatively, another long entry signal could be a lengthy hold over Friday’s high but below Thursday’s high, in this case, I would look to enter once the stock broke above the intraday’s range and $36. In this scenario, I would place my stop at Friday’s high, as I would not want to see the stock re-enter the range after breaking above Thursday’s high.
I am looking for a move toward the 50-day SMA, and Wednesday’s high, around $43 / $44, as a main target for the idea. If the idea triggers, I plan on giving the trade a maximum of three days to work and trailing my stop by half an ATR as the idea works.
Relative Strength Continuation In Energy
Energy ETF, XLE was up almost 3.5% last week, while the QQQs closed the week in the negative, down 1.56%. With the overall market down last, this year’s leading sector down last week, I find the strength in the energy sector interesting. If the sector continues to display relative strength this week, I want to be prepared to ride that momentum while it lasts.
Of course, XLE itself could be a way to express the idea if it materializes. But, I like to identify a stock with a clear-cut level to risk against if I am wrong and one with clear inflection levels that could spark a momentum shift. For those reasons, one energy name that stands out to me is Chevron (NYSE: CVX).
My Trade Plan
This is a setup that I will trade off the hourly timeframe and give up to five days to work once the trade has been entered. For entry, I am looking for a higher low on the hourly chart, ideally somewhere around $162s, above or near Thursday’s high. Once entered, I would want to see the stock hold above key resistance $164. I would add 25% size to my position, near $164, if CVX bases over $164 intraday.
*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.
My stop will be placed below Friday’s low, so around $160. I won’t be looking to chase this if the stock gaps up, for example. I will only enter if my condition is met: a higher low, enter once the higher low is confirmed on the hourly, ideally in $162s.
In this environment and most, traders ARE NOT rewarded for chasing, be it swing trading or intraday trading.
I would look to sell half of my position near the 200-day, which is also 1 ATR away from Friday’s close. For the remainder of my position, I would scale out toward $170, likely having limit order sells every $0.50 – $1 above $166 to piece out of the rest while trailing my stop loss by 1 ATR.