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  While this week was nothing but a boring chop-fest, the structure of the market still looks promising for a push into new highs over the next couple of weeks. The daily squeeze in the SPY (shown below) looks like it’s close to firing to the upside. And the QQQ (chart below) has finally recovered a bullish structure to its daily chart with a squeeze of its own and positively stacked exponential moving averages (EMAs).

Right now it feels as if everything is squeezing: SPY, QQQ, the Dow, and IWM have daily squeezes, and if that isn’t enough, almost every major sector ETF is setting up in daily squeezes as well (IYR, XLE, XLF, XLI, IYT, XLK). What this tells us is that across the board the markets are building up tremendous energy inside these squeezes and sooner or later that energy is likely to be released in the form of a run higher.

These are the moments in time when we need to get positioned in the cleanest setups the market has to offer and hang on tight (as long as they hold structure) in anticipation of a big move to the upside, fueled by the overall market’s squeeze.

 

 

 

We’re locked and loaded with put credit spreads in GOOGL and CAT (charts below), both of which performed well this week. GOOGL is looking like it could be our next $20K trade, although adding to the position at this point would be less than ideal. We’ll be holding onto these positions until we get our moves to new all-time highs or until we collect 75% of max profit on the spreads (whichever comes first). MMM, AMZN, and MSFT are also of interest right now and we’ll cover those in detail in this Sunday’s premium video.

 

 

 

Though our major focus is on the directional-opportunity that we believe is just around the corner, we never hesitate to collect some easy premium if the market is doing nothing but chopping itself silly. This week we sold iron condors on SPX and NDX, selling calls and puts slightly further out-of-the-money than this week’s expected move. We were able to collect 80% of the max profit on each of these condors, good for a little more than $2,000 of “low-stress weekly income.” 

This makes two consecutive weeks that we’ve collected some nice profits by selling condors, but we certainly are looking forward to the potential of these squeezes firing!

Enjoy your weekend, rest up, and we’ll talk to you this Sunday in the premium Watch List videos.

Stay Focused!

 

 

The Market is not really getting anywhere this week; however, we do have some great key levels in play and some nice squeezes gearing up for the next move. News made an impact for some stocks such as SQ, so for right now individual setups are best while we wait for a market-wide move.

Watch the video above for in-depth coverage of these individual setups such as: TSLA, FB, BA, and NVDA.

Stay Focused!

 

 

We continue to use the daily Ichimoku Cloud as a guide to see where the market will go next. The Cloud has been able to show us a pattern and we can utilize that information to plan our moves.

Here is our focus list:

SQ – News on Monday read “Square Plans To Offer Business Checking, Savings Accounts.” As we’ve learned before, news has an impact on the market. We are watching the 4-hour squeeze and 4-hour Cloud. If SQ can break and hold 211.5, we’re looking for 217 then 221.78/220C, which is a really nice option.

TSLA – Currently breaking into a 4-hour Cloud. If it can hold 606, we’re looking for a move toward 627 then 650.

ABNB – Setting up a really nice wedge on daily and 4-hour charts and a 4-hour squeeze with a 4-hour Cloud are also in play. If there’s a breakout, it could make a move toward the 4-hour Cloud top and right around 145/150 levels.

BA – Breaking a big daily downtrend, we’re looking for a push toward 241 and 244.65.

Stay Focused!

 

 

Happy Sunday Traders!

With the current structure of the daily squeeze in the SPY, we are looking for several weeks of upside momentum to capitalize on. We are also looking for a move in SPX into $4,250, which lines up with a new all-time high (ATH) at +2 average true range (ATR) on the daily chart.

The best swing trading takes place when the market itself is firing a squeeze, so now is the time to buckle-down and focus on getting positioned in the highest probability setups. A squeeze in the index means that most stocks may move higher, but you still want to be strict in focusing on nothing but your “go-to pitch” with setups that fit all your criteria.

As always, focus on stacking probabilities in your favor as much as possible. A daily squeeze for the SPY already indicates a high probability for a move upward across the board, but we want to focus on catching this momentum in stocks that have a high-probability structure that are part of a sector with similar high-probability alignment.

CAT is a perfect example of stacking the probabilities in your favor. The structure of the setup itself points toward a move higher and the sector it belongs to (XLI) has the same structure as well. Now, take into consideration the structure of the SPY, and you’ve found a setup where the odds of a move higher are stacked in your favor across the board.

Stay Focused!

 

Happy Friday Traders!

The action in the market this week was a mirror image of the action we saw last week. During the session Wednesday (5/19), we saw the volatility index (VIX) spike 2+ average true range (ATR) on the daily chart (just like last week), and as a result we saw the indexes slide to -1 and -2 ATR on the daily charts (again, just like last week).

As tends to be the case, however, once the VIX fizzled out and began to fade back down toward its 21 exponential moving average (EMA) during sessions yesterday and today, the indexes made a strong recovery with a bounce back to the mean and finished the week with a solid structure to the daily charts.

 

With a bullish structure (positively stacked EMAs plus support above the 21 EMA) to the daily squeeze for the SPY/ES (chart above), we will be looking for this squeeze to fire long over the next few weeks, offering a lot of momentum-driven opportunities in our favorite setups. As for our favorite setups right now, we’ll be covering those in-depth in the Sunday  e-letter video. Until then, here are a few we’ve got our eyes on (and a few we already have positions in).

1. GOOGL DAILY SQUEEZE (chart below):

• Though tech hasn’t been our favorite as of late, the index is looking much better here on the daily charts and we believe as long as it can hold support above the 21 EMA, we could see a 2+ ATR move toward the upside over the next few weeks
• GOOGL is our favorite setup within tech right now (FB is a close second) as it held bullish structure in its daily squeeze while the index broke down. 
• We’ve opened a long position here with a 6/18 -2990p/+2970p put credit spread, and are looking for this daily squeeze to lead to a move toward $2,400 (2+ ATR) over the next two to three weeks.

 

2. CAT DAILY SQUEEZE (chart below):

• While we do think tech and semiconductors could join the party to the upside, we also believe that the sectors that have been leading the way (XLI, XLE, XLF, IYT) could continue to move higher.
• We like the industrial sector (XLI) here, and the daily squeeze in CAT is one of our favorite setups in the group. We like it so much, in fact, we added to our Jan 11 expiration put credit spreads this week. 
• Like we do with every long setup we take, we’ll be looking for a move into 2+ ATR to upside around $248/share. 

While CAT is our personal pick in the industrial stocks, we think MMM has just as beautiful of a structure to its chart as well! Just remember, be careful getting too much exposure in one single sector, as it’s essentially the same setup looking for the same move.

 

3. IYR DAILY SQUEEZE (chart below):

• The daily squeeze in the real estate sector (IYR) is picture perfect here and we have an order working to take an entry on a June monthly expiration put credit spread.
• Aside from the structure of IYR itself, we love how the individual stocks within the group are set up just as nicely, signs of a potential group move (which are often the strongest moves).

 

We’ll cover a few more setups with you this Sunday, but for now here are a few of our favorites! As for closed trades this week, things fared pretty well!

1. SPX iron condor (chart below):

• On Monday morning, we sold an iron condor on SPX for expiration, looking to benefit from range-bound chop. After a bit of a “gut check” early Wednesday, the market was able to bounce nicely as volatility died down and the bounce was good enough for us to buy back the condor at 80% of max profit (a $1,300 profit on 10 contracts).
• As nice as these condors can be, they can become risky when the market is squeezing on the daily chart. With that being said, we’ll hold off on taking new condors for now with a bigger focus on allocating that capital to directional trades.

 

2. NFLX Call Credit Spread (chart below):

• With a bearish structure to the weekly chart and daily chart, we sold a call credit spread on NFLX a couple of weeks ago looking for a flush into -2 ATR on the daily chart, and that’s just what we got! 
• As VIX spiked and the markets slid on Wednesday, we took advantage of the fade and bought back the NFLX spread at 50% of max profit (a $3,800 profit).
• We think there is more downside left for NFLX, but we are going to avoid shorting it again (for now) as the overall market looks promising for some nice upside.

 

3. NVDA Put Credit Spread (chart below):

• Somehow, some way, the NVDA (5/21) 605/595 put credit spread we sold in late April came back to break even (after being at max loss for weeks!) this morning after the company announced a stock-split. This was simply pure luck, but we were more than delighted to close this at break-even after buying the spread back at $3.50 this morning.
• If there’s anything that can be taken from this, it’s that once a position is at 90% of max loss there is not much left to salvage by closing the position. Though it’s rare, every now and then lightning can strike and the position can come back in your favor. We don’t hope or expect for this to be the outcome, but we certainly don’t complain when it does!
• We’ll continue to avoid NVDA until earnings pass and the chart looks better.

 

Another week in the books, and the potential for some great opportunity over the next few weeks looks promising! We’ll be reaching out on Sunday with the Focus List video and we’ll jump into the details of all our favorite setups. Until then, rest up, and have a safe weekend.

Stay Focused!

 

 

 

We got the expected flush attempt by the market, but both E-mini S&P futures (ES) and E-mini Nasdaq-100 futures (NQ) held nicely at major inflection points, starting a potential reversal. ES is right near the daily Ichimoku Cloud, which we have held at and seen major rallies from this point every single time this year.

The market is not quite out of the woods yet, but if the ES can clear its recent resistance, and the NQ can hold above the 50-day simple moving average (SMA), we could make a nice push for an all-time high. One day at a time, but bulls are holding strong.

Stay Focused!

 

 

After keeping an eye on the 50-day simple moving average (SMA) last week, the market has started showing some pops to the upside. We need to be patient as we move forward and see what happens next. We could be setting up for yet another drop or we could see some rises to new highs.

Here is our focus list for the week:

NVDA – Bounced off the daily Ichimoku Cloud and 200-day SMA last week, so now we are looking for a continued push toward 590

GOOGL – The strongest of the tech stocks at the moment. If it breaks through point of control (POC) at 2292, we’ll be watching for a push toward 2331

ROKU – Currently squeezing tight on a 4-hour chart. It has a big 4-hour cloud top to deal with, so we are looking for a push back up toward 340

PYPL – It is forming a nice wedge. Will be watching to see if it’ll work back toward 252, or break down toward 233

TSLA – Reaching critical levels, right near the 200-day SMA. We’re stalking a bounce off 560 back up toward 606, or a breakdown of 560 down toward 539

Stay Focused!

 

 

In a market showing signs of volatility, you must have the willingness to not only be flexible, but a willingness to practice patience while waiting for ideal entries. This is a good environment to be “balanced,” with a few long positions in bullish stocks or sectors and a few short positions in bearish stocks that are breaking structure.

Google and Amazon were very profitable trades for us in April. Profitability had nothing to do with the stocks and everything to do with the structure of the environment. As traders, we don’t want to fall in love with the stock. Instead fall in love with high-probability setups, entries, and exits. Once the structure that served us well is no longer present in a particular group of stocks… we should no longer be present either.

Stay Focused!

 

 

Happy Friday, traders!

 

Another week in the books, and a wild one it was.

This week we saw something we haven’t seen in weeks — volatility. The daily chart of the Volatility Index (VIX) (below) is an important one to study here. When VIX is quiet, trading in a range near its 21 exponential moving average (EMA) is typically smooth sailing for the markets. However, when volatility suddenly spikes to +2-3 average true range (ATR) on the daily chart, well, you saw the brief impact of that this week. Not always, but more often than not, a move to +2-3 ATR for VIX results in a -2-3 ATR move lower for the indexes, and that’s what we saw unfold.

 

After an ugly flush under the 21 EMA on Wednesday and Thursday, the SPY (daily chart below) was able to rally its way back above the mean today after an impressive bounce (a good reminder of why we don’t short at -2 ATR. Much of this bounce in the SPY was due to strength in the energy, financial, industrial, and transportation sectors which continue to be the clear leaders in this market (and sectors where we’re looking for upside opportunity).

 

On the other hand, tech stocks (QQQ) and semiconductor stocks (SMH) continue to be the laggards here, both completely losing bullish structure on the daily charts (below). These are now trading well under their falling 21 EMA points. With this kind of structure, we view stocks in these two sectors as “short the rally” stocks rather than something we’d try to get long in. We like the idea of going short tech stocks like AMZN, but we would need to see a bounce back to the 21 EMA before considering an entry, as we’re too extended to the downside (chart below). Though they could drop lower from here, in terms of probabilities, a short entry at -2 ATR will not likely serve us well over the course of our career.

 

 

 

For new long positions, we want to focus on trading stocks in sectors that have maintained their bullish structure, such as CAT, MMM, and UNP. The new trade we took in CAT this week is a great example of what we are looking for, not only has CAT maintained its bullish structure as the market dipped, the sector it belongs to (XLI, Chart Below) maintained its own structure and continues to show signs of leadership.

 

For CAT (below), we took yesterday’s bounce off the 21 EMA as an opportunity to open a new position (remember, we caught a nice move for profits on this one last week) with a 6/11 expiration 235/230 put credit spread. Should the structure hold up, we’ll be looking to take profits on a push into $248-$250, which is about +2-3 ATR above the 21 EMA. Should the stock unravel and fall below -1 ATR, we’ll look to cut our losses.

 

Taking advantage of the flush earlier this week, we sold a call credit spread on TSLA that led to a quick $1,700 profit. This trade was a good example of the kind of structure we look to short, as well as the ideal entry we look to take (near the 21 EMA). On both the weekly and daily time frames, TSLA is showing signs of a breakdown, trading under the 8 and 21 EMA points. TSLA lost it’ positively stacked EMA range, and histograms turned negative.

Once we got the flush to -2 ATR, that was all we were looking for and we took the money and ran. Bearish structure, short entry near the 21 EMA, book profits at -2-3 ATR, rinse and repeat! This is how you trade the ebbs and flows of a chart with a focus on high-probability entries and exits.

 

Next week, the tone will be set by whether or not the SPY can hold above its daily 21 EMA. If it can hold, stocks in strong sectors such as energy and industrials should continue to move higher. However, if the SPY once again falls under the 21 EMA, this could lead to another leg to the downside for the overall market, which could easily put a damper on the momentum of these leading sectors.

We also suggest keeping a close eye on the VIX. If it stays near its 21 EMA, that fares well for the market moving higher. Should we see another big +2-3 ATR push to the upside for VIX, that will likely send the market right back down.

Just like we do in any environment, we will be focusing on the structure of the overall market (SPY) to dictate whether or not we want to focus on longs or shorts, and will stick to our rules of taking entries at the 21 EMA and taking profits at 2-3 ATR extensions.

Stay tuned for this Sunday’s premium video, where we’ll dive in and cover a few setups we’ll be focusing on in the weeks ahead!

Stay Focused!

 

 

 

E-mini Nasdaq-100 futures (NQ) finally lost the 50-day simple moving average (SMA), causing both E-mini S&P futures (SE) and E-mini Dow futures (YM) to drop down to their 50-day SMA. With a relief pop today, it’s critical to see what happens next. Is this pop a perfect opportunity to short or is this the beginning of a chance to buy the dip?

We’re focusing on some key inflection points to guide the way. If the market continues to go lower, we’re watching for ES to move toward the Weekly 21 exponential moving average (EMA) and into the daily Ichimoku Cloud. We need to keep a tight focus to end the week strong.

Stay Focused!