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Broad Market Outlook
Where to place the proper stop has been a discussion Shake and I have been having recently. LOD, PLOD, prior pivot, break even, etc. That brings up an interesting debate as we all focus on one primary goal to make money, yet often find different ways to earn it and preserve it.
Breaking down our two primary roles, Shake's role being to find the best opportunities for us all to money, while my main focus is to limit your downside.
Reviewing some of the common defensive strategies they all have there own pro's and con's. Some out shine in certain markets while are not the best in others.
The main two broadly speaking are Prior Pivot (Shake's focus) and LOD trail/Break Even (my focus).
In this current market where the market is breaking out higher, the prior pivot is the better route. You will give the name more room to work in your favor without getting pushed out randomly. More room to trade, more room for upside, less shakeouts and less buys backs.
When the market starts to shift away from the new highs market into one that is more volatile, one we have not seen since the beginning of the year. This is where a focus on break even can be better suited. Where pivot lows are getting smoked left and right.
From a technical trading standpoint, the prior pivot is the proper spot, while break even is only significant to your own cost basis. My reasoning and focus on this, is that as much as we want to trade without emotions, we do trade with emotions, they are present. We make decisions and lack of decisions based on emotions that rarely are rational until after the dust has settled.
If a name we expect to trade higher is starting to come back to our price, more often the idea is probably not going to work. If you or I can let that band aid simply fall off with zero pain (break even), we can keep those emotions in check. While avoiding some of those painful band aids (bigger losses) that you have to hold your breathe before ripping off.
This market recently has shown me that, anticipating the painful rip has been more painful then simply waiting for that day to come, as the market continues to drift higher, that day hasn't arrived.
If this market continues higher, I will continue to lean more into Shake side of trading vs the pivot low. Whenever that day comes when we have to start ripping a few painful band aids off then we can reassess.
If you are recapping your trades with the Monthly Goal sheet, it could be a smart idea to recap your trades so far this month and see if you would have done better with those trades had you given them the proper room vs the prior pivot.
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Macro Rotation Outlook
SPY
Dow Jones
Nasdaq
MDY Mid Caps
IWM Small Caps
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Sector Rotation
Sensitive - sectors that have moderate correlations to overall market conditions.
VGT Tech
VDE Energy
VIS Industrial
VOX Telecom
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Cyclical - sectors that are more sensitive overall market conditions.
VAW Materials
VCR Consumer Discretionary
VFH Financials
VNQ REIT
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Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
VHT Healthcare
IBB Bio Tech
VPU Utilities
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Friends and Family Challenge
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Big Picture Set Up
AAPL
Giving this Apple some room vs the $120 pivot low to see if we can stay in until the retest.
BDX
Got filled on some BDX up through $248 vs $240 aiming to hold until the retest.
CE
CE is setting up in a tight little base near highs, will be looking to buy up through $133 vs $128 this week.
DHR
DHR has been basing in a $8 range, will look to buy up through $228 vs $220 with the goal of holding until the retest.
DPZ
DPZ has finally woken up and for now giving it the $10 of risk to hold for the retest, if it can clear this $400 next week we should be in good shape.
FB
Got into some FB up through $280 vs $267 still in and will look to add up through $280 if ti wants to continue higher.
GPC
This GPC is tight here in this 98/99 area to sneak in for the $100 breakout vs $94.
HD
HD has been my main focus capital wise recently buying up after the shakeout at support. It is still putting in lower pivot highers as we saw on Friday, if it can pull in put in a higher pivot low. Could be a good, reminds me of SHOP before it had the pop back to highs.
JNJ
JNJ has been battling with this $156 for almost a year now, as it continues to get tighter it could be ready for its next leg.
MAS
MAS has this $60 blue sky breakout level that looks prime in time, for now we can look to sneak in above $56 vs $54.
MDLZ
Grabbed some MDLZ up through $58 and will be looking to add through the $59 breakout level in time.
CRM
Will be looking to pick some CRM up through $230 vs the earnings gap down low. With the goal to hold till the retest of the all time high.
