Author: Ivanhoff

Momentum Monday – From Failed Moves Come Fast Moves

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The market correction continues with full force and there are no places to hide. The stocks that held the best in the past couple of weeks – enterprise software, are among the hardest hit today. This is what typically happens during forced liquidations when people emotionally decide to get out of everything at any price.

The area near 260 was a major level of support for most of 2018. Today that level was breached on high volume, which typically means that it will now act as a resistance.

People keep saying that some of the most powerful rallies happen in the context of a bear market. It is true, but they are not that easy to time. Some of the important signs of a potential turnaround bounce would include a failed breakdown that leads to a strong close and a gap up on the next day.

In today’s show, we go over the price action in SPY, QQQ, OKTA, ZEN, TWLO, BBY, and some of the defensive stocks.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.

62 Stocks Doubled In 2018

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The market is still in a correction mode but plenty of stocks have had a good year. As of December 15, there are 62 that have more than doubled. If you study their charts, you will notice how the majority of them started their move with a huge-volume breakout to new 50-day highs.

We see quite a few enterprise software names on the list, which only comes to remind us to always pay attention to industry relative strength. It is a lot more sustainable catalyst than just company’s earnings: TWLO, TTD, OKTA, MDB, AYX, COUP. Most of these names continue to be among the strongest stocks currently in the market and are likely to outperform if the general market bounces.

There are also a few cannabis related stocks, which was one of the hottest industries in 2018: TLRY, NBEV.

As usual, the list is dominated by biotech, healthcare and medical research names which account for almost half of the big 2018 winners.

There are a couple turnaround stories in the retail space – CROX and FOSL. There were a lot cannabis-related earlier in the year, but the correction in the last two months has caused a lot of damage to the sector.

While the S&P 500 is down 11.2% from its 52-week highs, the 2018 Doubles are down on average 24.3% from their 52-week highs. Most of them offer multiple great long trading opportunities during their ascent. Now, quite a few of them are setting up on the short side. Some examples to consider: WWE, REGI, SSTI, AMRN,

Check out my latest book: Swing Trading with Options – How to trade big trends for big returns.

Momentum Monday – Bear Flags Everywhere. What’s Next?

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As active market participants, we need to be prepared for different market scenarios. Here are the two most logical developments for the rest of the year:

$260 is the line in the sand for the S&P 500. It has been tested numerous times this year. Buyers have consistently stepped up to defend it. If SPY loses it, we will likely see another quick leg lower and 260 is likely to become a level of resistance. Since correlations between stocks are extremely high during corrections, no sector can really be a safe place.

The bullish short-term scenario is 260 holds and the market rallies on some type of unexpected news. Another variation of this scenario is an intraday break of 260 to lure short-sellers and then a strong rally and a close above it. If this happens, the two types of stocks that you would want to own on the long side are:

  1. The ones that have held the best so far – enterprise software stocks like AYX, WDAY, OKTA, SPLK, TWLO, etc.
  2. The ones that have been hit the worst – Chinese ADRs, high-momentum stocks that have correct 40-50% from their recent all-time highs like GRUB.

On this Momentum Monday, we also discussed the impact of the stock market on the economy and most specifically AAPL and LULU.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.