Time to Study

This has been the craziest week for markets. January has been the craziest month for markets. Personally my account had huge swings (see my last blog post) but I came out on top by the end of the month making about 15%. I’m continuing to refine my process.

Weekly charts on indices don’t look great for longs. This week saw big distribution days and volatility. Forget the hype on certain individual stocks, the rug can get pulled on them just as fast if not faster than they went up and given what some brokers have been doing I wouldn’t want to be stuck in them anyways. Those traders learned about short selling and short squeezes, soon they will learn about bag holding. This is about playing the long game. Having your account live to trade another day/year/decade.

$SPY closing below 50ma. Watching for more downside.
$QQQ breaking and closing below 20ma. 50ma most likely next.
$IWM breaking below 20ma. 5 distribution days on volume. 50ma most likely next.

Silver has been trending, that I can get behind ($SLV $EXK $AG $PAAS $MAG). $UVXY / VIX has been hot the past couple days. Bitcoin names are moving again ($RIOT $MARA $BTBT $GBTC). I’ll be more focused on those type plays this coming week as opposed to playing other individual names while the indices are weak. I’d honestly rather sit this week out and study charts than get into trades that will probably have a high probability of getting stopped out. Or I’ll play this week like I did on Friday which is scalp all day. This is the time to study, to refine your process, to not get chopped up in every other trade and give back gains.

Can I be wrong? Can the market turn around tomorrow and go right back up to highs by the end of the week? Absolutely it can happen. I want to see strength first. I’m not going to buy into the market hoping that that will happen, it needs to start happening that way first. There could be a day or two relief rally before going lower (bear flag), there could be a V shaped bounce back to highs, indices could continue the cascade lower… Consider all possibilities and make a plan for them that way you aren’t making rash decisions in the moment with this much volatility happening.

Tight stops. Smaller position size. Focus on sell side / VIX / BTC / GLD/SLV / sitting on the sidelines and studying….. this is my game plan for this week.

Stocks & Sectors Showing Strength

The market feels a little weird. We had massive euphoric runs in EV names ($NIO $TSLA), SPACs ($QS $SBE), alt energy / fuel cell ($FCEL $LAC), bitcoin names ($RIOT $MARA), and i’m sure others I missed. All while big names like $AMZN $NVDA $FB $NFLX $AAPL remained fairly quiet.

$IWM has been leading the indices. It feels like there has been a disconnect between the indices and individual stock names. There are days where the DOW can be down 100s of points but the stocks you are holding are up for the day. Or your stocks are all down on the day and the indices are putting in new highs. Mark Minervini often suggests to stop looking at the indexes and focus on your stocks (‘try it for a year’). The past few months I’m starting to get his point.

Right now many of the sectors that were hot a month ago or even two weeks ago are cooling off and new sectors/stocks are starting to setup and look good. I’ve noticed commodity names in particular are looking pretty good. Gas/Oil names, Gold and Silver, Department stores and Retail.

$EXK breaking out two sessions ago from a flag
$QEP putting in a sideways base after making a run. Pulling back to 20ma support (my favorite kind).
$SM another Oil/Gas name setting up. Putting in a sideways base after making a run. Pulling back to 20ma support.
$JNUG gold miners putting in higher lows. 5ma crossing up 10ma and riding up moving averages.
$TECK putting in a sideways base after a making a run. Pulling back to 20ma support.
$FCX putting in a sideways base after making a run. Pulling back to 20ma support. Breaking out two sessions ago.
$MIK pulling back to 20ma support and breaking out 3 sessions ago
$JWN putting in a sideways base after making a run. Pulling back to 20ma support.

One of the great things about going over hundreds of chart setups and breakouts is you begin to quickly see all the similarities. Look at each of these charts and notice what’s happening. Notice what happened just before they had previous breakouts. 20ma support, flag, range expansion combined with volume expansion…. Get to know the setups and you’ll build confidence when putting on positions. You’ll know when it’s working and more importantly when it is not.