The Shakedown 3/1/20

Blood in the Streets

The market just had it's worst week since the 2008 Financial Crisis as a Corona-virus induced correction took place. We saw stocks fall aggressively in giving back nearly 4 months of gains in a 6 day period.

The selloff began with warning shots the previous Thursday that led to some downside follow through Friday. We walked into a viscous gap down Monday morning where stocks could barely bounce and we began to see true panic Tuesday as stocks began to sell off aggressively. We saw this panic continuing into week end until we finally saw some relief buying intraday Friday, giving us a new 'line in the sand,' Friday's low. 

We will see how committed buyers are to Friday's reversal as futures are currently gapping down to wipe away a portion of that bounce back. If futures stay where they are, I would look to buy early strength Monday morning in some of the strongest names that I will highlight below (for a shorter time framed trade).

As traders, we have to look at this as a very necessary and very welcomed 'reset' in stocks. The one thing that is tried and true is getting great information of the strongest stocks in these monstrous sell offs. Once the market stabilizes these names rip higher and provide massive opportunity for us. During these volatile times, I will personally cut down on my risk and amount of trades I take, along with my time frame. With stocks dramatically gapping up and down daily as these new ranges are discovered, I don't want to trust anything enough for overnight risk. In my long term account I have begun adding my favorite names in this weakness and will continue to nibble into buys slowly. 

The next piece of news we should expect to hear is Trump calling for an emergency rate cut to stabilize the market. The reaction to the news will be very important as we will see how the market reacts to overwhelmingly good news with the Corona-virus looming overhead.

After 4 months of "easy swing trading," the first sign of volatility is not the time to blow up your account. The easy trading is behind us so if you crushed it when it was easy, there is no sense in giving back those gains when it's hard. There is definitely a ton of opportunity in this type of volatility with daily ranges being stretched much greater than normal. Just know that any trades I'm taking right now, I'm risking much less than when we're in that "easy"/trending environment. I consider the people who "love this type of volatility" to be "hero traders" who would rather look cool than make real money. Kill it when it's easy and take your foot off the gas when it's hard, simple stuff.

Earnings season winding down a bit

Names I'm most looking forward to this week:

Monday AMC (after market close)

STNE, LVGO, PI, YY

Tuesday BMO (before market open)

TGT, AZO

Tuesday AMC

VEEV HIIQ

Wednesday BMO

BZUN, INXN

Wednesday AMC

ZM, SPLK

Thursday AMC

OKTA WUBA

LK Long

While the media continues to panic and fear monger over the Corona-virus, we will continue to let the charts do the talking. LK showed us great relative strength and has been a go-to stock. With the broad market sell off, this gives us a great opportunity to grab this LK through 40. If the market hadn't sold off so aggressively last week, I would expect this one to be at highs. Will most likely tier stops with a low-of-day stop as we're not in that outright swing trading environment any longer.

We'll have to see if and how this one triggers next week regarding stop-locations, but right now below Friday's low looks like the first area. It will be more difficult to achieve proper risk/reward equations if you have to give things a decent amount of room in this environment, so have to keep that thought in the back of your head.

Trigger: $40

Stop: $35.89/tiered to LOD

Target: $46/48-52+

Hope to see you in the chat Monday!

Watchlist coming in the following email.