Author: Ivanhoff

Momentum Monday – The Bulls Are Still Alive

The charts on Momentum Monday are powered by MarketSmith

There was an interim trade deal with China on Friday. I am sure this is not the end of the soap opera but for now it is enough for the market to rally. Obviously, the candle on Friday is not particularly bullish if it is followed by more relentless selling on Monday but we are certainly seeing an improvement in price action and market breadth. The large-cap market indexes are back above their 50-day moving averages. The 52-week high list is growing and it is not dominated by REITs and defensive stocks only. On the contrary, we are seeing various sectors represented – semiconductors, electronic equipment, biotech, software, service, retailers, restaurants. The Fed is expanding its balance sheet again and companies are buying back their shares at near record levels. All those factors might be enough to improve market sentiment and lead to higher prices. And when it comes to price action, higher prices have the uncanny ability to attract sidelined cash.

Keep in mind that the next earnings season starts next week with a bunch of financials scheduled to report. As always, earnings season will create many new trends and will provide an additional clue about the current market sentiment – there’s no better measure of risk appetite than the market reaction to earnings.

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Swing Trading with options – How to Trade Big Trends for Big Profits

Top 10 Trading Setups – How to find them, how to trade them, how to make money with them.

The 5 Secrets To Highly Profitable Swing Trading

Momentum Monday – Enough Strong Stocks Not To Be Too Bearish

The charts on Momentum Monday are powered by MarketSmith

SPY and QQQ tested their 200-day moving average last week and survived. Both are back near their declining 50dma. The question is does this rally have more room to move or is it just a bounce within a big range?

While the 52-week high list is still thin and dominated by mostly defensive plays like REITs and utilities, there are still enough stocks that are acting constructively – AAPL, LULU, NKE, semiconductors, homebuilders. There’s enough strength not to get too bearish.

There is not enough evidence to get aggressively bullish either. US Treasuries and Gold are still looking strong, which is an indication of insecurity in the current market.

In other words, this is a fast markets for nimble traders only – intraday and swing traders. For anyone else who is active – long-term trend followers and position traders, it is a time to protect capital and confidence.

P.S. Check out my trading books. They are super practical, packed with actionable information that can be put to use right away:

Swing Trading with options – How to Trade Big Trends for Big Profits

Top 10 Trading Setups – How to find them, how to trade them, how to make money with them.

The 5 Secrets To Highly Profitable Swing Trading

Momentum Monday – Growth Leaders Still Under Pressure

The charts on Momentum Monday are powered by MarketSmith

Most breakouts are still not working well. On the contrary, we continue to see quite a few failed breakouts that lead to quick moves lower. High-momentum stocks seem to be targeted one by one. A few weeks ago, we talked about SHOP and ROKU standing tall in an ocean of red. Since then, they were demolished. Last weekend, we talked about CVNA holding above its 50dma but starting to crack – it dropped 22% this week. 

The price leaders have been typically defensive, high-yield stocks like utilities, consumer staples, REITs. Also building materials and homebuilders. Maybe this is just another rotation in an ongoing bull market. Maybe, it is more than that and we will see the major U.S. stock indexes drop below their 50-day moving averages. All I know is that the majority of long setups I took in the past month failed and almost every single short setup I took (via put options) has worked really well. Until that trend changes, there is no need to be aggressive on the long side. 

There is no need to guess when a better trading environment for long setups will return. The future momentum leaders will break out ahead of the indexes. We will see breakouts starting to follow through and pullbacks bouncing. 

P.S. Check out my trading books. They are super practical, packed with actionable information that can be put to use right away:

Swing Trading with options – How to Trade Big Trends for Big Profits

Top 10 Trading Setups – How to find them, how to trade them, how to make money with them.

The 5 Secrets To Highly Profitable Swing Trading