The Shakedown 4-19-20

30% Off Lows, 15% From Highs

LAST WEEK, S&P 500 (+3.00%):

Monday: -0.91%

Tuesday: +2.95%

Wednesday: -2.12%

Thursday: +0.48%

Friday: +2.70%

We saw the market continue its massive bounce back off lows as Trump announced different guidelines and specific Coronavirus related recovery thresholds in order to reopen state governments. The market responded very well to news of reopening the economy thus far. We've now run nearly 30% in the past three weeks, and this price action doesn't remain sustainable without some sort of consolidation. 

I am definitely becoming more and more cautious to the long side as the market continues to rage higher without much consolidation. That being said, you can't fight the price action, and we haven't shown too many signs of slowing down. With the ultra risk-on behavior that SHOP, AMZN & NFLX displayed last week, you would think this market will have a difficult time selling off. Things can change in an instant though, so I will remain flexible in my thinking. Don't want to be max long AFTER a 30% three week move, have to be realistic.

The GOOD NEWS is we have a monster week of earnings slated, which I will get into in a bit. We all know what to expect out of earnings -- Coronavirus related shutdown crushed their outlook, but how will stocks respond? We have seen the market rise inexplicably after nearly every one of these horrible economic numbers comes out. Record high unemployment claims? BUY! 15% Unemployment? BUY!!

We are getting great lessons first hand in that PRICE ACTION rules everything. The stock market is not the economy.

From a trading standpoint, I'll continue the short-term intraday trades. Knowing and understanding market levels is always a huge help in this environment. Knowing where to look for support and resistance in the indices, will help your individual stock executions 

In this type of trading environment, I go into everyday asking myself 3 questions.

"If the market gaps up, I ...?"

"If the market gaps down, I....?"

"Market's flat, I.....?"

MASSIVE Earnings Week Ahead

First BIG week of earnings as we got most of the banks out of the way last week. Recent Monster Netflix reports Tuesday after the close as one of the first behemoths to go. We get to see the disaster that is airlines sector begin to announce this week as Jet Blue kicks us off Tuesday morning. Some other reports I'm looking forward to reporting this week are CMG, IBM, HAL, LMT, EDU, TRV, SNAP, TXN, NDAQ, BIIB, SLAB, TMO, ORLY, LVS, XLNX, AAN, LLY, DPZ, OMCL, WWE, AXP & VZ.


We've kept our eye on this ALEC a couple weeks and boy does it look ready than ever. Putting in a strong day Friday, ALEC closed right around it's big resistance level. If it can break through that area on high volume this week, it has room to the $30's rather quickly. This biotech can really move as its range on a given day is about a 10-15% move.

Love the fact its tightened up so much below this level for us. The one thing I dislike about the setup is how closely it closed near the resistance level. I don't want to buy a breakout 15 seconds into the week, so it would be ideal if this one does not go after resistance immediately so we have a chance to assess the market environment for the week.

Through 24.50, with some volume, and this one can make an absolutely massive move.

Trigger: $24.50

Stop: $21.89

Target: $30-36+

Hope to see you in the chat Monday!

Watchlist coming in the following email.

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