The Shakedown 1/5/20

And We Are BACK

Trading desks are expected to be fully manned this week for the first time this year when we will get our first real look at what 2020 trading will be like. Following a year end momentum rally, I am anticipating some downward pressure early on for a few different reasons. Seasonally, January is one of the weaker months of the year.

With the US & Iran situation escalating, we will see how much the market cares about this news. International tensions are high and uncertain, two qualities the market does not favor. While I don't believe these tensions should shock the market, sometimes the market just wants an excuse to pull back. If we don't end up pulling back, that would be a pretty large indication of the underlying strength of this market.

The first two areas to watch in the SPY for support are at $320/321. We have earnings coming up in a few weeks so this is not the full-fledged risk on situation we have been enjoying since the beginning of October. 

Earnings season ramps right back up again in the third week of January. Here's a look at the schedule for the month ahead.

SOFTWARE NAMES LOOKING TO COME BACK

Thursday we saw major strength in the software sector as most of these names led the way the first 8 months of 2018 before being taken out to the woodshed when valuations got a bit too frothy. Many of these names are coming out of macro consolidations, and we see the leader in the space COUP breaking out on high volume on a day many stocks struggled as the Iran news hit the market.

If these high beta stocks want to make a comeback in the early part of this year, it will be an amazing trading environment. We need to be stalking these setups.

TEAM Long

TEAM's daily chart shows a massive coil the past 5 weeks, and a longer term consolidation the past 12 weeks. We saw software names lead the way Friday, if that trend continues into the rest of the month, we should see TEAM rip through the 124 level. We want to see the 126 area taken out on some volume as the 100&200sma stand in TEAM's way of a feasty breakout. 

The weekly chart shows the 30ema, which has been acting as resistance for the past 12 weeks, is now hugging price ever so tightly. If it can break above this area with a strong move, it could march back towards highs.

Trigger: $124

Stop: $119.79

Target: $139-144+

Hope to see you in the chat Monday!

Watchlist coming in the following email.