The Shakedown 3/8/20

The Fear Continues

Want to talk volatility? Let's talk last week. Monday saw stocks bounce higher over 4%, followed by Tuesday's fall of 3%, Wednesday's rise of 4%, only to fall 3% Thursday and continue to fall ~2% Friday. This is the type of volatility that always comes with major trend breaks. This is why we call this a "Day Trader's Market," because trading ranges get vastly stretched, increasing intraday opportunity, while the broad market can easily forget about the prior day's action, making swing trading almost obsolete in this environment.

From an active trading standpoint, I will continue to day trade until we see the market act better as a whole. If you are a pure swing trader, the sidelines remain to be the place to be until things clear up. If you are investing for the long term, now is a great time to DCA your favorite stocks in a long term account. 

Coronavirus fears continue to rise as the virus continues to spread. The media will continue pumping these stories so don't think this headline is going away anytime soon. The volatility and chop will continue in markets (my guess) for some time as this news will dominate the airwaves.

Oil prices began to collapse Friday after Vladimir Putin and Russia told OPEC they were unwilling to cut oil production any further, flooding the market with oil (supply) causing prices (demand) to plummet. This was a complete slap in the face to Saudi oil companies who have been working closely with Russia in the OPEC coalition to curb production and support prices. Saturday, the Saudi's retaliated by slashing their crude prices in an effort to push as many barrels into the market as possible. To put into perspective the dramatics surrounding these moves: Oil closed at $47/barrel Thursday and was trading at $32/barrel over the weekend, over 30% move in a few days. Oil and Energy stocks will be crushed heading into the week on this news - good for gas prices though! Frankly, this is bigger news for the market than Coronavirus (not to be insensitive:)

Overall, it's definitely a risk off time and we have to focus on market levels and prices rather than headlines, though we will be hearing more and more Coronavirus news at least the next few weeks, so get used to it. Those of us actively trading in the alpha chat did an amazing job last week navigating the choppy waters and decreasing our time frame to eek out some wins in this difficult market. We saw first hand how quickly stocks can rise and reverse in these type of environments and I commend everyone who was able to take advantage of the fluctuations last week. We need to be very flexible in this environment and not rigidly think stocks will rise every day. The market is handing out great lessons and information every day with the whipsaw markets, even if you're not actively trading it's a great time to watch the price action to see how things move in this type of environment, as well as work on discipline. You will appreciate the easy environments 10x more if you stare at this shit price action for some time. 

Earnings season winding down a bit

Names I'm most looking forward to this week:

Monday AMC (after market close)

SFIX

Tuesday BMO (before market open)

DKS, PSN

Wednesday BMO

LK, PDD, INXN

Wednesday AMC

WUBA

Thursday AMC

ADBE, AVGO, DOCU, DOMO, HTHT, MDLA, ORCL, WORK, ULTA

GO Long

There are weeks where there are so many setups I have trouble picking out the best one for Trade of the Week. This is not one of those weeks. However, this GO, Grocery Outlet, may be a diamond in the rough. After a 5 month base, this budget grocery retailer is setting up perfectly. As a budget grocery retailer, this company actually BENEFITS from the Corona scare as they sell extremely discounted items that they buy from producers with excess inventory or the packaging (not the product itself) is damaged.

So if you're going to stock up on food and non-perishables for the impending apocalypse, you going to WHOLE FOODS and paying top dollar or GROCERY OUTLET for the low?! 

They released earnings Friday morning and got a solid reaction in the stock movement, closing the week just below base resistance. Technicals, Earnings, and the news cycle are all pointing in the same direction for this stock --- like this one a lot through 34.

Trigger: $33.65/34

Stop: $31.37

Target: $39-42+

Hope to see you in the chat Monday!

Watchlist coming in the following email.