The Shakedown 10/6/19

Stocks Dip, then Rip!

Wild week out of stocks as the first half of the week was characterized with stocks selling off en masse, only to see a massive reversal Thursday that pushed into the close Friday. The initial selloff was on a bad economic number in the ISM manufacturing report. The massive reversal came the following day when the non-manufacturing ISM report showed another poor number, creating capitulation and ended up being a buy-the-news event. Stocks continued to rise Friday on the back of a strong jobs number.

You can see in this last paragraph how reactive the market is to headline risk. In 3 years of this newsletter I've never once mentioned the ISM Manufacturing Report, and in this environment it becomes a market moving number. A negative headline concerning the Chinese delegations Trade War Stance, so I'm expecting we'll walk into a Monday gap down.

If last week's price action taught you anything, it's to remain nimble and open minded in this environment. Stocks are switching directions quickly and often, creating a difficult but opportunity filled environment. If you're going to trade this environment, you have to shrink down your time frame, stay relatively lighter in your position sizes, do NOT add to trades, and be looking to take profit more quickly as it can be taken away rapidly on a market gyration. With such wide market action Thursday-Friday, it makes looking to buy Monday morning pretty tough. Have to let the market settle in and see if it wants to hold onto that recent strength first.

With earnings season coming up, there's no shame in stepping to the sidelines until the whipsaw action calms down when earnings season yields some more clear setups.  Earnings season technically kicks off Tuesday, October 15th. There's another big Fed meeting end of the month Oct 30th where the market will be looking for another rate cut.

Stay limber out there and keep your head up for the end of the year push.

PFPT Long

I know this PFPT has been trade of the week before, but if this is the daily consolidation we've been absolutely dying for, how could we not focus on the setup this week?

The weekly chart on PFPT is A+ and now that the daily chart is beginning to matchup, this setup should be a top name to be watched this week. The $130.50 area has been such heavy resistance that if it can sustain a move over it, the stock should explode. After last week's pivot high, $133 becomes the resistance area you need to see break to consider this one technically "triggered," but I wont be buying that high. 

I am a bit more gun shy heading into the week after we saw stocks really run Thursday/Friday, so we're very late to any move in buying Monday. The nice part about this PFPT is that it waited around and is giving us an opportunity this week.

122-123 is the area that has absolutely been holding up, so the trade doesn't technically fail until that area is breached. It's unrealistic to think I will be buying $130.50 and giving it $8 risk and expecting to make a solid risk/reward on my time frame so I will definitely look for an intraday entry and play off the inside day low.

Trigger: $130.50

Stop: $125.89

Target: $142-148+

Hope to see you in the chat Monday!

Watchlist coming in the following email.