The Shakedown 6-14-20

How Quickly Things Change

LAST WEEK, S&P 500 (-4.74%):

Monday: +1.21%

Tuesday: -0.75%

Wednesday: -0.56%

Thursday: -5.76%

Friday: +1.20%

"It was all good just a week ago."

After a 10 week and 48% move higher from the March 23rd lows, SPY finally had the massive breakdown day last Thursday, plunging almost 6% lower on massive volume. Heading into this week, there were all the telltale signs of a pullback, when most everything was going vertical and the bulls were beating their chests the loudest --- time for a rug pull. The market will never cease to humble the loudest voices in the room at some point.

After that monumental break in price action Thursday, the question remains; will this be a buyable dip or is this the start of a broader move lower? There's no way to tell at this moment, but the huge support level at 300 in the SPY held up very well Friday, that will be the number 1 thing I look out for next week to determine whether we hold up or not. That 300 area support level. It's not a cemented price such that if the market touches 299.99 that it is doomed, but it's whether or not buyers are willing to support this resistance-turned-new support area over the next week. If not, we probably very simply see lower prices and should likely be more patient to the long side with entries. This very well could be a shakeout move before we go higher of course, have to keep all scenarios in the back of your mind this week.
It seems the Corona-themed stocks were strong towards the end of the week as second-wave virus headlines being to trickle out more and more. These are the PTON, ZM, WORK, NFLX, TDOC, DOCU type names. Stay-at-home names and software names were generally the keys here. 

Will the cyclical stocks be able to hold up? Or is this a dead cat bounce in those names that will inevitably drag the market lower? The days leading up to the sell off, we saw a massive shift back to the 'normal economy names,' these being things like airlines, financials, industrial and energy stocks. Once those stocks lost their bid, the whole market came diving lower. These names will be a big part of assessing whether or not SPY wants to hold this 300 area or wants to head back lower.

No A+ setups out there after Thursday/Friday's price action as many charts were broken in the process. Not salivating to put on new risk after being stopped out of many positions this week. We will need to watch how this market responds closely, because everyone wanted a dip a week ago. Now that we got the dip, nobody wants to buy stocks. That is generally how it always goes. The question remains though, do we see another sell off this week or do we see stocks hop back in the intermediate uptrend?

A Couple Things I'm Watching For

Earnings Season Winding Down

Click the above picture for a full list of the companies reporting this week

We were blessed with a strong trending market for over two months straight and we've just seen the pattern break for the first time last week. While the two months leading up to the selloff have been very active for us, I would expect the next week or two to be on the less active side as the dust settles and this market consolidates a bit.

XLRN Long

XLRN is one of the most popular stocks among institutional investors & hedge funds, and with it's tight upper level bull flag we can see why. This biopharmaceutical company held up extremely well amidst market weakness this week, nearly putting in a tight inside week at support.

We want to see volume expand through last week's high at 97.25 for an entry. Support and stop location will be somewhat wide percentage-wise in this stock, but since its such a high beta, trying to make 25%+ in this type of name is not out of the question from here.

Trigger: $97.25

Stop: $89.89

Target: $120-130+

Hope to see you in the chat Monday!

Watchlist coming in the following email.


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