Uncategorized

We’re sitting in a vulnerable market where patience is necessary amid the choppy back-and-forth action. The flush has shown that the path of least resistance could be to the downside but support from the 21 exponential moving average (EMA) could make the downside path troublesome.

As we’re approaching resistance at the +1 average true range (ATR) the question is if the selling pressure is over. Are we heading toward all-time highs or is the market oversold heading into monthly expirations, grinding the market to the downside?

With the daily squeeze forming on the S&P 500 (ES) the market could see a dip for the next flush or stabilize and move higher. In today’s video we’ll discuss where to short the market and where we’ve positioned ourselves with credit spreads in the Compounding Growth Mastery.

Stay Focused!

“We overestimate what we can accomplish in a year, and underestimate what we can accomplish in 10 years.”

I’ve heard this quote thrown around over the years, and there’s a lot to take from this for us traders. It is only human nature to seek instant gratification and often we put huge expectations on ourselves in the short term. We want to make big money and we want to make it right away. The reality is, reaching a point of consistency in your trading is a result of focusing on the right things year after year. 

Successful traders put their natural desires for instant gratification aside and instead focus on the big picture. Trading is a game that can lead to long-term wealth. Trading can also lead to financial ruin in the short term if you approach the game with the wrong mentality. What some traders fail to realize is the market experiences volatile ups and downs. As a result of trying to rush the process, traders rob themselves of the steady, forward progress they could have otherwise achieved with a different mindset. 

Trading is a tough game, but imagine how much harder it becomes when placing huge expectations on yourself in the short term. Just as important, imagine how much easier the game could be for you if your goal was instead to make a lot of money over the course of many years. With the second mindset, you’re focusing strictly on the big picture and solely on the things that can move you closer toward your goals over time. 

Over the years, I have learned that my job is to simply trade one clean setup after another. To put it simply, that is it and nothing else matters. I don’t come to the market thinking about what I can accomplish this week. Instead, I simply focus on waiting for the next high-probability opportunity. I eliminate short-term expectations, deadlines, and any other stipulations. I know that if I simply do my job and trade nothing but the best setups the market has to offer over and over again, the numbers will work in my favor over time. This process slowly moves me toward the financial independence so many of us are after. 

If you find yourself stressed over what you feel is a lack of accomplishment in the short-term, I suggest you stop focusing so much on the next one to two weeks and instead focus on being a good trader for the next five to 10 years. You will likely find yourself feeling much more “free” as a trader when you stop trying to accomplish all of your life’s goals ASAP!

It’s the classic tale of the tortoise versus the hare, and in trading tortoises end up wealthy and hares continuously “spin their wheels.”

Stay Focused!

This vulnerable market is starting to move to the upside, slowly unfolding our bullish thesis on direction. Earlier in the week we discussed the critical levels that led the market to trend lower where we were able to go short and take advantage of the pops to the downside trendline.

Over the last few days the bulls started pushing the market higher and today we broke through a large inflection point at $4,392 toward the 50 simple moving average (SMA) near $4,434 on the S&P 500 (ES). This is the first step at returning to a bullish market. 

If we hold the 50 SMA, that will be the next step toward the “right” (bullish) direction… but remember to stay patient because there is always the possibility of a fast break lower.

Stay Focused!

The market is currently vulnerable with high volatility and big levels. Conditions recently switched from the bullish trend we’ve seen all year to a downtrend below the daily Ichimoku Cloud for the first time this year.

Rather than buying the dip, we’re seeing a steady pattern of a “short the pops” market.

We have a few events on the economic calendar this week, the biggest being the FOMC meeting minutes on Wednesday, October 13, at 2 p.m. Eastern. Retail sales are released at 8:30 a.m. Eastern on Friday, October 15. With the recent focus on inflation, it’s important to note how these events can affect the market.

Here is our focused list:

GOOGL — One of the strongest tech stocks this year. If the market drops, expect GOOGL to drop to point of control at $2,731. Looking for a gap fill from $2,755 to $2,771. If GOOGL fills the gap, we’ll look to buy the dip at the gap at $2,755. 

ROKU — Currently in a 2-hour squeeze. Point of control moved from $305 to $325. If ROKU drops below $319, look for ROKU to fall to $314 and potentially to $305. If it holds $319, look for ROKU to break from $330 up to $340. 

MRNA — After a strong uptrend, MRNA dropped below the daily Ichimoku Cloud and is setting up a squeeze. Point of control dropped from $325 to $310. If MRNA moves to the upside, look for a move toward $330 to $340. If it trades below $310 and approaches $293, we could see MRNA drop to $283 and potentially $271. 

Stay Focused!

As a trader it’s important to know how to read trade alerts so you can quickly take action in this fast-paced market. For those of you in the Simpler Trading live-trading rooms, you’ve seen our traders send out trade alerts in the thinkorswim® (TOS) format. 

Watch the video above so you can quickly decipher trade details from where to enter and exit a trade based on the type of spread traded. 

Stay Focused!

When a strong stock fires a squeeze to the upside there is typically the potential for five to eight bars of momentum. This means when a weekly squeeze fires long there is the potential for five  to eight  weeks of momentum, while a daily squeeze has the potential for five to eight days of momentum.

Weekly squeezes are one of the most powerful setups a stock can form as the energy building up inside the squeeze can often lead to weeks, if not months, of continuous momentum. This giant “wave” of momentum makes for an ideal time to build long positions either before or after the squeeze fires.

Setups based off lower time frames often have a stronger likelihood of firing long when there is a weekly squeeze releasing significant energy in the background. Daily squeezes in particular are one of the best times to build a position in an attempt to catch the continuation of the weekly squeeze power. A squeeze on the daily chart is often the moment in time when a stock is gearing up to make a bigger than expected move. Once a weekly squeeze has fired I am looking for a daily squeeze at the 21 exponential moving average (EMA) to start building my position.

To take things a step further, 4-hour squeezes are the moment in time for a strong move inside of the daily squeeze. When a bullish 4-hour squeeze fires to the upside inside of a daily squeeze, it can often cause the bigger time frame to fire its squeeze as well. Entries in a 4-hour squeeze allow us to build our positions during the quiet chop as opposed to chasing the stock once it begins to run higher.

What we are looking for here is the “domino effect” of energy being released on multiple time frames. Even in a volatile market NFLX proved to be a textbook example of a bullish triple-squeeze over the last couple of weeks. This made for a great trade in the Compounding Growth Mastery. If you are new to the squeeze, begin to approach your prep with this “top down” approach, looking for squeezes on larger time frames to provide the momentum needed for squeezes on lower time frames to get moving!

At the moment, TSLA is another example of a triple-squeeze with squeezes on the weekly, daily, and 4-hour time frames. This is one we’ll be keeping a close eye on into next week, especially with earnings around the corner. We were able to buy back our put credit spreads on the stock this week for a profit, but we think there is more gas left in the tank. Don’t forget to join us for pre-market prep on Monday morning on the Focused Trades YouTube channel as we’ll take a look at TSLA, the indexes, and much more!

Stay Focused!

After a volatile and fun market the last few days let’s see what the rest of the week has to offer.

One thing to note is that we have the nonfarm payrolls (NFP) job report on Friday morning, which could upset this market.

After a big drop from the S&P 500 (ES), the market held, chopped, and finally popped through resistance to the daily mean at $4,389. This is an important reminder that every pullback is just that — a break from the market’s bullish run higher. 

Let’s review compasses in the market, like volatility (VIX), that we’ll be watching as a gauge for the market’s direction, as well as identify key levels on TSLA, ROKU, and other stocks on our focused list. 

Stay Focused!

The S&P 500 (ES) closed below the daily Ichimoku Cloud on Monday, shifting market sentiment. We’ll be continuing our theme of “if this, then that” and using the daily Ichimoku Cloud as a compass. If price is above the Cloud, then we are very bullish. However, we’re already slightly bullish for this vulnerable market as the S&P 500 closed at lows on Friday below the daily Ichimoku Cloud. With this downside trend we’ll be focusing on higher lows to make our trades.

Here is our focused list:

GOOGL — On Monday GOOGL hit the bottom of the daily Ichimoku Cloud and continued to trade below the 50-day simple moving average (SMA). Use this as a compass to the downside. GOOGL dumped below the $2,666 level near $2,600 but managed to close above it. If GOOGL holds this $2,666 level watch for a move up to $2,743. If it drops toward $2,600, it could drag technology lower and potentially free fall to $2,500.

MRNA — Much needed pullback to the weekly mean. Broke out of its wedge and closed on Monday below the daily Ichimoku Cloud. If MRNA holds the weekly mean at $330, look for it to break $340, then $350, and up to $375. If it drops below $310 look for $292 as the next big level.

NVDA — Leaning bearish due to its daily squeeze firing to the downside and after it broke the daily Ichimoku Cloud on Monday. Arm acquisition decision on October 10 will be a big catalyst. Good news can make it explode, bad news could lead to downside pressure. Can NVDA work back up to $200 and get rejected or will it drop to the $194 to $188 range? If it can hold the weekly mean at $197 and work back toward $199, look to take NVDA to the upside to point of control (POC) at $207.

TSLA — Reported strong delivery numbers over the weekend for a big gap up toward $800 and then headed down toward the $780 level on Monday. If TSLA maintains the zone between $780 and $760 we’ll stay more bullish. If it drops below POC at $760, TSLA could add to the market dump and drag the SPX lower.

Stay Focused!

We’re seeing a change from our typical “buy the dip” market where we look to buy the dip at the 21 exponential moving average (EMA) and take it to the upside. With bearish momentum, we could see a transition to a “short the rally” market where we short the market at the 21 EMA for a flush to about -2 to -3 average true range (ATR) extensions and look for a bounce back to the 21 EMA to repeat the process.

In today’s video, we’ll review which spots to look for to take our short positions. It’s important to note which setups we want to avoid and which setups are maintaining their bullish structure in volatile market conditions to take long, like NFLX. Be patient and disciplined in this market and focus on the path of least resistance.

Stay Focused!

The markets were met with strong selling pressure this week and the daily charts of the major indexes and sectors lost bullish structure. To us, a loss of bullish structure takes place with a series of closes under the daily 21 exponential moving average (EMA), a negative histogram, red 10x bars, and a lack of positively stacked EMAs.

Until the market has two to three solid closes above the 21 EMA, the path of least resistance is most likely to the downside. The goal is to continue playing the ebbs and flows of the market but in the opposite direction of what we have been doing for the last handful of months. This is what we refer to as a “short-the-rally” market environment. 

When going short, we want to pick our spots just as wisely as we do when we’re going long. To profitably trade a downside trending market we want to avoid shorting “in the hole.” In other words, we want to avoid shorting at -2 to -3 average true range (ATR) extensions. Instead, we want to short the rejections of the bounce into the 21 EMA and aim to take profits on the flush into -2 to -3 ATR (chart below).

With a decent bounce into the close on Friday, we’ll have to see if the markets can gain support into Monday for a move back to the 21 EMA early next week. If the S&P 500 (ES) gets rejected there this could be where we get our opportunity for a better short.

In Sunday’s video, we’ll dive a bit more into the shift of momentum we’ve seen over the last few weeks, along with a few “gems” that are still setting up with bullish structures in the midst of a volatile market. We were able to take profits on both our HD and NFLX swings this week in the Compounding Growth Mastery. Have a restful weekend and we’re looking forward to tackling whatever the market throws our way next week. 

Talk to you on Sunday!

Stay Focused!