Category: Momentum Mondays

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

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

The charts on Momentum Monday are powered by MarketSmith

Despite the mostly negative news-stream, SPY and QQQ are still hovering near all-time highs. Typically, the market averages are lagging individual stocks and at the beginning of a new bull market, we tend to see plenty of stocks break out ahead of the averages – these are the future momentum leaders in the making. There is a serious lack of new leaders in the making currently. We continue to see mostly non-inspiring breakouts that seem to be lacking the energy to move higher. I highly doubt that homebuilders, banks, and gold miners can really lead the market higher. We discuss some interesting setups in medical devices stocks and opine on the future of Netflix.

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