It’s back to the basics. We’re focusing on the “best” trends the market has to offer.
At the moment, the sectors showing trend, structure, and momentum are the energy sector (XLE), healthcare sector (XLV), and fertilizer stocks.
We’re seeing buy signals, positively stacked exponential moving averages (EMAs), and green 10x bars across the board.
Now, the only thing missing for an ideal entry is a pullback to the daily 21 EMA.
In today’s watchlist video, we’ll discuss our favorite setups in each of these sectors along with where we’d like to set chart alerts to enter positions this week.
Another wild week is in the books for the markets. The indexes and leading names continued their grind higher in what has been one of the “crazier” short squeezes we’ve seen in a while.
Next week we have quarterly-expiration in the options market on March 31, which likely means the market could trade sideways into Friday. While we patiently wait for more clarity in the indexes, we’ll be focusing on the best trends the markets have to offer and taking good entries as they’re offered.
What are the “best of the best” trends in the market at the moment?
Based on our criteria, energy stocks, healthcare stocks, and fertilizer stocks all have the attractive combination of trend, structure, and bullish momentum. As good as these trends look, it’s important to not chase an entry.
A dip and a better entry is always around the corner, and that better entry is always worth the wait.
Below are a handful of our favorite setups in these leading sectors:
XLE: Energy Sector
EOG
DVN
UNG
EOG Daily Chart
DVN Daily Chart
XLV: Healthcare Sector
JNJ
CVS
CVS Daily Chart
Fertilizer stocks:
MOS
CLF
MOS Daily Chart
Notice a theme here?
These setups are all in uptrends, have positive histograms, and positively stacked exponential moving average (EMA) points. When a setup fits this criteria, our only job is to wait for a dip and take action when the ideal entry is offered.
We’re going into the weekend holding positions in DVN, CVS, and a few others that we’ll be covering in the Sunday watchlist video. For the stocks and sectors that don’t have these bullish criteria, we’ll ignore those until they begin to rebuild their charts.
The market is at key inflection points which means plenty of opportunity for us traders. Once price reaches major support or resistance levels, anything is possible.
We must avoid having any major bias in one direction or another.
We’re continuing our conversation on the daily Ichimoku Cloud now that the S&P 500 (/ES) is trading near the flat line level at $4,510. This will be the Cloud top level for the rest of the month, with another flat line level to follow in April.
This is a critical zone for the overall market:
Now that the /ES broke through this range, we could see a push to $4,600 at the top of key ranges.
The /ES could also fail, retreat to the Cloud top, and roll over.
While the /ES consolidates through these key levels, we are also watching the 4-hour squeeze develop. This is starting to give the market structure. As the squeeze gets tighter and tighter, it could eventually either pop out of the Ichimoku Cloud or hit resistance and reverse.
The market could continue to be range-bound, so play off the key levels, watch the squeeze develop, and be ready for when the next big move occurs.
In the video above, we’ll define the key levels on the major indexes and discuss our two favorite setups on PANQ, the cyber security stock, and TSLA now that it is breaking through huge zones.
After huge swings last week, the market is trading at major inflection points.
When we reach big levels in a headline-driven market, we need to remove our bias and stay mindful that anything could happen. The market could fail at key levels (as we’ve seen recently) or break through them and continue to explode.
S&P 500 (/ES)
The bulls will have to fight hard now that the S&P 500 (/ES) is approaching the daily Ichimoku Cloud and trading above the weekly 21 exponential moving average (EMA) at $4,455.
On Monday, the /ES held the 200-day simple moving average (SMA) at $4,465 and is now trading above the 50 SMA support level, which we haven’t seen since the market rolled over in January.
Our line in the sand this week is the 50 SMA zone between $4,400 to $4,418. We’ll see if bulls will be able to take the /ES higher or if the bears will drag the market below this zone.
Remember, when the market reaches massive ranges we must evaluate the big levels we could see next.
In the video above, we’ll cover the major chart analysis, review our focused list, and lay out the road map ahead.
Here is our focused list:
SHOP — Closed at $780 on Friday. Looking to buy the dips. Above the $660 range, SHOP has a chance to push higher. See if it could move above $700 to $712 and hit $780 this week. Below this level, it could sell off to $600.
NVDA — One of the few catalysts with their global AI conference, training, and key notes this week. Large key zone from $269 to the after-hours level at $275. NVDA is trying to push out of the daily Ichimoku Cloud. If it moves through $275, it could keep exploding to $285. If it breaks below $257, we could see it move back toward $250 and $240.
The S&P 500 (/ES) rallied to the weekly 21 exponential moving average (EMA) on Friday but closed the week below the weekly mean. Keep in mind that it’s completely normal to see a reversion to the weekly mean in a bearish market, just as we’ve seen flushes to the weekly mean in bullish markets.
What this means for the short term is things could appear more bullish. So long as the market closes below the weekly mean, we can use these rallies to the weekly 21 EMA as opportunities to get short.
For now, we’ll patiently wait for the Volatility Index (VIX) to rise and trigger more downside momentum before we enter short positions on the indexes.
In the video above, we’ll lay out scenarios we could see with our line in the sand, trend/structure, and volatility.
This week the S&P 500 (SPY) rallied back to the weekly 21 exponential moving average (EMA), which is a pivotal level of resistance for this bearish trend. For both the bears and the bulls, how the market behaves at this level will likely dictate the direction of the next few weeks.
Keep in mind that reversions to the weekly 21 EMA are normal throughout the course of a trend. Looking at the chart below, you can see that last year we had several pullbacks to the weekly mean, which all made for great buying opportunities.
SPY Weekly Chart
In a bearish trend, rallies to the weekly 21 EMA make for great opportunities to get short, so long as the market continues to finish the week closing below the mean. At the moment we are patiently waiting to initiate a few shorts on the indexes here, but we’ll need volatility to spike to start triggering more downside.
VIX Weekly Chart
While the SPY rallied to its weekly mean on Friday, the Volatility Index (VIX) faded to its own weekly 21 EMA, which could be the “low” for volatility.
Watch VIX closely next week, especially after having closed Friday trading under the bottom daily Bollinger band. In the event VIX begins to rally from here, we could see the markets begin to roll back over.
Remember there’s no need to rush trade ideas in this environment.
Focus on structure, identify your levels, and patiently let things unfold while you pick your spots wisely. If the markets finish next week with a close above the weekly mean, it signals a big shift in trend and structure and would require us to begin tweaking our game plan.
So long as we’re under the weekly 21 EMA, be prepared for the next flush once VIX begins to wake up.
The market had a monster rip on Thursday as we approach the end of this busy trading week.
It’s been a volatile week dealing with big catalysts with the Federal Reserve, interest rate decisions, and retail sales. Keep an eye out on Friday as big money will rebalance their portfolios and equity options and index options & futures expire due to triple quad witching.
When we see big pops for a few days straight like this, it’s important to flip the switch and capitalize on these big moves. We have to stay flexible and switch from shorting pops to buying dips.
As the S&P 500 (/ES) is still trading under the daily Ichimoku Cloud, keep in mind that we can see price rip to key ranges, stop and reverse, and head lower. The range from $4,400 to $4,455 is a hard level that the ES will either break through or hit and roll over.
In the video above, we’ll discuss the key liquidity levels for the market indices, how volatility can shape the narrative, and potential setups on SNOW, SHOP, TSLA, AND NVDA.
We’re expecting a busy week of catalysts for the market with events on the trading calendar, economic calendar, and world wide news.
Market Events
On March 18th, we have triple quad witching – the expiration of equity options and index options & futures. Pay attention as this could lead to liquidity hunting, pinning at levels, and many options getting destroyed.
S&P Indexes rebalancing also occurs on Friday, which is when big money rebalances their portfolios at the end of the quarter. Be prepared as we could see certain stocks pop and rip hard or unexpectedly drop.
Take a look at the economic calendar on Wednesday for retail sales in the morning and the statement from Federal Reserve Chairman Jerome Powell in the afternoon.
As for the headlines, there are many catalysts from Ukraine and Russia to China that could affect the market.
Here is our focused list:
AAPL — Negative supply chain news over the weekend caused a large drop into Monday. The make-or-break zone is $151.90 to $154.70, with the 200-day simple moving average (SMA) at $153.60. If AAPL drops below this zone, it could hit $147 and lead the technology sector lower.
NVDA — Liquidity is above at the $225 to $230 zone, with point of control (POC) specifically at $226. If NVDA hits $208 to $206, it could dump hard to $200 and $195. If NVDA pops, it could hit multiple key levels above starting with $218.
SHOP — As long as SHOP is below $585 to $574, SHOP appears bearish. The largest level we’re watching is $500. If SHOP fails to break through $529, it will likely breach $500 to $470. If it pops through $529 and holds, it could hit POC at $556.
Heading into the new week, the market is showing bearish structure across the board on the major indexes. The issue lies in the fact that there isn’t much movement happening because of large levels of support.
Note that the key level of support for the S&P 500 (SPY) is $420.
There are weekly and daily squeezes on the SPY with lower time frame squeezes on the 4-hour, 2-hour, 1-hour, and 30-minute charts. These nested squeezes could fuel the fire short and take the market through the key level of support at $420.
Remember, a squeeze is a large build up of energy. If the market can release a large amount of energy and break support below, this could trigger a move into a new low.
In the video above, we’ll discuss the scenarios for the market next week and review both short and long setups on names like INTC, IWM, AMZN, and UBER.
The market finished the Friday session with weakness which could open the door for more downside next week…
Despite the bearish structure of the indexes, we’ve seen a handful of nasty short squeeze rallies, which are to be expected in a downtrend. The key, and what matters most, is that up to this point these bear market bounces have not shifted the structure of the indexes, sectors, and leading stocks. In other words, everything still looks bearish for the time being.
SPY Daily Chart
Heading into the weekend, the S&P 500 (SPY) has bearish squeezes on the weekly, 2-day, daily, 4-hour, 2-hour, 1-hour, 30-minute, and 15-minute time frames. When we have bearish structure and momentum on the weekly and daily charts, these clusters of nested squeezes on lower time frames can serve as a great gauge of the next directional move.
We’ll be watching for the “domino effect” that can take place when a lower time frame squeeze fires short and triggers the other squeezes to do the same. This release of energy across multiple time frames can lead to a lasting move in either direction.
While the squeezes can help, we will have to see the SPY break support in order to get a meaningful flush into new lows.
For now, $420 is the key level of support to watch on the SPY next week. If that level can break as the squeezes fire short, the market may begin its next leg toward new lows.
But, if $420 holds as support, there is always the potential for another vicious short squeeze into resistance.
SPY Hourly Chart
We have open short positions in IWM, AMZN, INTC, and long positions in energy names like EOG and DVN. In our Sunday watchlist video, we’ll break down a few of these setups in detail, and the entry/exit levels we’re using for our swings.
