End of Month

1-31-18

Overall Market-

Market gap down and selling hard for most of the session, led by losses in energy and health care stocks with a broader market sell-off attributed to worries about higher borrowing costs and the weakening dollar.

Selling pressure concentrated in the health care sector after JP Morgan (JPM), Amazon (AMZN) and Berkshire Hathaway (BRK.A, BRK.B) announced an initiative to improve health care for their employees through a joint venture.

A monthly survey by Case Shiller shows a gain in the January consumer confidence index to 125.4, its second-highest in 17 years. (again wide spread euphoria, the theme persist.)

The focus is now expected to turn to the FOMC, while not expected to adjust monetary policy, outgoing Fed Chair Janet Yellen could strike a more hawkish tone to broadcast the Fed's intention to hike rates several more times this year. Look for news released today. 

SPY (Spider, S&P 500, EFT - tracks S&P, used by many traders, you can also track SPX but the numbers are higher, the SPY tends to be easier to reference.) nearly pulled all the way back to the 13dEMA, futures look to be stable and are slightly higher. Be cautious today and wait for the market to settle in. I will be looking for value plays in energy after the huge sell off yesterday. (not really a surprise given the recent run, assume selling was profit taking and not fundamental weakness.)

VIX (Volatility) Several of our subscribers profited from our mentions of the coming volatility squeeze, congratulations. Levels broke above 15 spot on the VIX during the height of panic yesterday. This spike has placed volatility back in its historical range and the highest levels we have seen since August 2017. Be mindful if the market continues its relentless bull charge after this pull back; XIV (leveraged inverse volatility), can become a smart play as well. Just be aware like all leveraged ETF's they have daily re-balancing and are a loser in the long term nearly 90% of the time. These are never buy and hold, no matter how appealing the chart looks in the short term.

NVDA (Nvidia corp) Long continues to prove profitable here, Extended above moving averages and I personally can not buy. Earnings coming on 2/8/18 be mindful at these all time highs, even a good earnings could get crushed, if guidance does not provide large amounts of future value.

AMD (Advanced Micro Devices) Earnings released on this after market yesterday, strong on all accounts, guidance also hinting at continued growth. Price trading slightly higher in pre-market. We have nearly filled the gap in the chart and are approaching oversold levels again. If we approach a double top here and SOXX shows weakness (see below), this may become a strong short candidate. 

SOXX (Semiconductor ETF long) the 50dEMA will be a critical price level to hold for this sector, we failed to make a new high last week even with the market surge. This could be a sign of some weakness in the sector, MACD showing bearish breakout signal on the daily. Will be key to watch the rest of this week. 

 

XLE (SPDR Sector energy)(Update, called this one nearly perfect, sector pulling back to weekly down trend resistance. Need to see if this level holds before initiating long positions in this sector.) Sector looks to be setting up for a pull back. Should oil reject current price levels, expect the sector to follow.

FCX (Freeport) (no change see XLE notes)Nice earnings but price remains stalled below $20.00. Price indicators showing a pull back, I am a buyer on a pull back to the 50dEMA $17.75

CHK  (Chesapeake) (update 1/31/18 locked in a loss yesterday on this name, weakness has been known for some time but letting price action playout is a staple of my trading, may look to go long should $3.50 level hold and energy recovers see XLE notes) conflicting signals forming here after last weeks weakness. Remaining long on a starter position. Will continue to access as price develops. Bears are gaining some conviction as price fails to close above $4.00

MRO (Marathon Oil) (no change see XLE notes) Price upgrade has not helped move this higher, looks like a pull back will be needed before buyers step in. I will be looking for a pullback similar to FCX here, 50dEMA $16.90

SLB (Schlumberger LTD) (no change see XLE notes) Indicator showing a bearish breakout on MACD as we exit RSI oversold levels. This supports a pull back broad across most energy sector stocks we are following. Will look for a place to add, assuming I am not stopped out on final shares. 

Natural Gas (FEB 18 contract): Gap was unable to fill here and price rolling over hard before ever really getting its legs back. Holding just above $3.00 spot at time of writing. ADX is somewhat high on this pullback in the shorter time frame. I will expect price to recover some before restesting $3.00

 

SNAP (snapchat) (Update 1/31/18, short remains highly profitable, market most likely helping this short, note that price was unable to test or flush below $13.00, bulls my step in here to test conviction of bears. Stop on final shares unchanged, longer term hold for me until proven wrong.)(Update 1/29/18 I remain bearish long term on snap, short term could go either way here, no real conviction from bears or bulls.(Update, twitter announces "storys" as well, see if this moves price.) Short position on this name remains active on final 1/3 position. I remain bearish on this name in the long term. Should price action close or gain strength above $14.50 bulls will have control again. Stop is in place on final shares at $14.80

 

Swing Positions (Details are intentionally vague, in respect of paying swing subscribers)

  • $IMGN final shares running, great entry from $6.00 price
  • $SNAP Short (in profit, final shares stop is just above break even.)

Note all other swing positions have been closed. Speculative plays closed for very small loss or flat. losses accepted on DSW and CHK. 

Robinhood Challenge: No positions. Small drawdown, account remains above $800

 

Low float watchlist plays

  • TNDM Stopped and closed position. Great trade over all, very profitable.
  • PIXY price holding above 50dEMA, may look to enter with small size.
  • VTGN price back to 50dEMA, potential bearish breakout forming on MACD. I am bullish on this but need to see technicals better before entering.
  • GALT a pull back 50% of previous move and 50dEMA are converging at $4.00 price level, this may be a potential entry.
  • DRNA continues to pull back, will look to enter on trend eyeing 30 and 50 day EMA's for potential entry points.
  • REXX Price looks to have clearly rejected the 50dEMA, this one looks to be in bear control.
  • DCIX back on watch, showing signs of life. keep shippers also on the back burner.

Please note, while it may be an easy call to short many of these names it is NEVER advised to short low float stocks. It is one thing to be on the bull side and have potential 100-200% gains but to short lowfloat plays in asking for ruin. Waking up to a 100 or more % loss would literally be catastrophic for most traders. 

 

BITCOIN/CRYPTO

Blockchain frenzy has died down in the past week or so. Former names can not be traded with more traditional indicatiors as irrational buying cools off, names to keep on long term watch $GROW, $TEUM, $SRAX, $RIOT, $MARA, $DPW, $XNET

of note in the above crypto names, TEUM and DPW are showing the best consolidation after bitcoin frenzy. No entries yet but those names deserve some extra attention.

 

Fire watchlist for market day 1/31/18

  • BSPM (end of day volume and nice recovery here)
  • IPWR
  • IPCI (higher risk penny)
  • PLUG (extreme RSI oversold bounce potential)
  • JNPR
  • HTBX

Low Float/Small Cap momentum-

As is typical when the broad market is selling and panic sets in, momentum trading slows. Veteran traders know to pile into volatility, as a result momentum buying is at the least slowed. These type of days tend to lead to choppy trading. In turn smart traders will just sit back and wait. No reason to risk profits. 

This is very reminiscent of the selling in January of 2016. During that period the market rolled over and continued to sell off hard. Momentum was hard to find and suffered for several months there after. 

Not saying that will happen in this case, just be mindful of history repeating itself. 


Momentum disclaimer:
Use caution when trading these low float names, they can crash even faster then they rise. Lock profits and do not look back, never play the "what if" game on these names. You can be up or down several hundred or THOUSANDS of dollars in minutes and in the case of a T12 material halt, you could be in for massive pain or worse be trapped in a position for days or weeks until material evidence is sufficient to remove halt.
 

Closing Notes:

Not pushing the panic button just yet but I am very mindful of Oil prices and the weakening dollar. Should the market correlate with these two historical influencers, there is potential for real trouble. Every bull market has been followed by a bear market, yes simple and regurgitated stock market mambo jumbo, just keep it in mind.

We have had an incredible run the last 6 months and personally over the last 18 months I have never seen the market this profitable. I will not be pressing trades until sufficent evdience is presented to step back on the gas. 

While this may seem boring, trading is all about one thing... Managing risk, nothing more, nothing less. 

Sit on your hands if you must, walk away and shut down your trade stations. Just don't give back months or years of hard work. Remain patient and be sure to not change what has made you profitable in recent times. 

Thank you again, lets go team! 

 

Disclaimer: We are not responsible for losses for any reason. We are just an investing club here, seek financial advise from a professional before acting on any of this information. This information is strictly my opinion and what I am seeing in the market. The information above is not a trade recommendation to buy or sell. I am not a licensed broker, dealer or finical adviser. Trading comes with considerable risk and may not be for everyone. Past performance is not indicative of future performance. Never trade with money you can not lose and paper trade to prove profitability before using real money.