Market remains shaky

2-2-18

Overall Market-

U.S. stocks were higher at session's half, tracking rising global bond yields despite underwhelming economic data, as a corresponding move in the 10-year note off 2.75% eased investors' worries about higher borrowing costs. Record highs in shares of component stocks Boeing (BA) and Microsoft (MSFT) helped offset heavy losses for DowDupont (DWDP) after the chemical giant reported upbeat Q4 expectations but cautioned seed and pesticide sales could be negatively impacted by challenges in the farming industry.

In economic data news, Q4 non-farm productivity showed an unexpected contraction, its first quarterly decline in nearly two years. The slower pace of production corresponded to a significant increase in unit labor costs of 2.0%, more than twice what was expected.

Weekly jobless claims slid 1,000 to 230,000, while continuing claims increased 13,000 to 1.953 million.

Non farm pay roll released this morning may add further fuel to the fire should they prove weak.

While I am not saying we are in a bear market, I do believe we are in the start of a much needed correction. The issue here? If we are in a correcton, we could be looking at a very large one indeed. The market has not pulled back in any real capacity since January 2016. This could get painful and panic stricken very quickly. Given market euphoria continues to remain high, I personally expect this to "come as a shock" to many investors. 

SPY Futures and premarket trading has this trading below $280 level, which in my opinion was a very key short term level as we displayed much trouble breaking over this level in weeks past. I expect to see this continue to bleed as profit taking should trigger if we break below $270. 

VIX (Volatility) Volatility is most assuredly back. This indicator continues to show signs of a broad market move to the down side. Look to capitalize on continued weakness using short term leveraged instruments. TVIX, UVXY are two of my favorites. Please note that this tends to follow the market but the calculation for volatility is largely based on options. There is a time when this does not move with the market, those divergences are typically a key notion for some action. In the past weeks we have seen prices rise in this indicator while the market was also rising. A sign of things to come? perhaps... 

NVDA (Nvidia corp) Inverted hammer on the daily, sign of some weakness here. Would not be surprised if this comes down hard. This has held up surprisingly well given the markets weakness. A change for this name to play catch up and bears to gain hold? I believe so.... I have been wrong here before, take my statements with a grain of salt, I am bearish on the price levels this high. 

AMD (Advanced Micro Devices) I can not get on board with this recent rally. Looking at the daily, I still believe this is in a down trend, we continue to make lower highs since march 2017. The big picture is my focus. Short term price action is clearly bullish. Gap here is basically filled, what happens next will decide direction. We very well may break to the upside but I can not unsee what the chart is showing. The weekly chart may also help explain what I am trying to say. Take a look and do your own research before initiation of any positions. 

SOXX (Semiconductor ETF long) Inverted hammer here was well, potential to continue short term weakness in sector. If the market pulls back, this should follow in toe.

 

XLE (SPDR Sector energy) Holding OK for now, no positions, market showing to much weakness to enter. (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) Bears crushed this ticker, weakness and some material news leading to a massive push down side. Levels to low to short for me and to week to join long. On watch for a potential short in comming days weeks. 

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): Price action now firmly under $3.00 spot, potential here to retrace this down move. Overall bearish, short term bounce potential before adding short.

 

SNAP (snapchat) Options action showing some high implied volatility, may be the signal we need to get this moving under $13, only one way to find out... let it trade. profit stops in.  (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.)
  • $PED long (set and forget, defined risk)
  • $PLUG long (RSI extreme over sold bounce, needs to close above $2.00 for strength)

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: Bought 2,000 shares of AKER yesterday, sold half position at push to high of day .39 area. Holding final 1,000 shares. Account value premarket as of writing $989.37

 

Low float watchlist plays

  • PIXY flush, no entry, no siginal for long. On watch for one or two more sessions before removing.
  • 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 Major dip buying opportunity here yesterday. flushing to $3.70 support and recovering nicely, continue to watch for a move higher from here. 
  • DRNA nice bounce here at key moving averages, potential trend following trade here.
  • REXX Price looks to have clearly rejected the 50dEMA, this one looks to be in bear control.
  • DCIX nice move here, anyone that profited congratulations. play seems to be over for now.

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 2/2/18

  • DFFN
  • TEAR
  • CHFS
  • TWTR
  • BSPM
  • SKLN

Low Float/Small Cap momentum-

My favorite low float strategy is proving profitable in the past week. I am always on the look out for a low float curl and squeeze over the 50 day EMA. We have seen this work great on both SKLN and AKER watches.

This strategy is one that typically lasts for one to two weeks max. I will look for other tickers showing similar setups. Note that this only works for a short period of time as there is a limited number of potential candidates that are both full of shorts and showing moving averages that have similar appearances. I have made boat loads of money in the past on these squeezes between the 50 day and 200 day moving averages. 

Continue to use caution as with all momentum it works until it does not. At which point you become a pig to slaughter, try not to be greedy. Take the risk and lock in the loss or gain accordingly. 


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:

I have been hesitant to enter any large cap swings given the current trading environment. Thank you to our swing subscribers for being patient as we wait for more favorable conditions to arise. Current swing trades are taking place in low float stocks mostly due to their retaliative detachment from the overall market. 

Be sure to focus on building your cushion for the new month and take it slow. 

I hope by now you understand my approach to the market. Slow and steady if always better than fast and hard. The market will destroy you and is literally designed to take advantage of your emotions. You must remove emotion, the best way to do this is reducing size, reduce risk and above all else remain objective as much as possible.

Remain confident in yourself and your trading, it takes years of hard work but it is worth the journey, trust me. as always, Remain hungry and humble!

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.