Happy Friday, traders!
Despite earnings for tech giants taking place this week, we saw very little action from the indexes as we continue to consolidate inside the 4-hour squeezes we have formed near the daily 8 exponential moving average (EMA).
Interestingly enough, the QQQ has consolidated to the point that we are now two days into a fresh daily squeeze forming. Ultimately, we think there’s a good probability of that daily squeeze firing to the upside, as we still have the bullish weekly squeeze setting up behind us. In the meantime, however, playing a deep out of the money (OTM) iron condor on NDX for next Friday’s expiration is something we’ll discuss in this Sunday’s newsletter, so keep an eye on your inbox for a breakdown of that potential trade.
While the markets chopped themselves silly this week, our focus was on the AMZN earnings announcement which took place last night. The company announced blowout numbers, which was good for a $100+ move to the upside in the after-hours, and if you’ve been following us for the last handful of months, you know this weekly squeeze in AMZN has been a big focus of ours. Last week, we discussed the 5/21 – 3,500/3,490 put credit spread that we sold in anticipation of this weekly squeeze finally getting something going.
The timing of how this move unfolded for us was “interesting” to say the least, as the weekly squeeze was finally looking ready to fire long into the night of the earnings announcement. Holding through an earnings announcement can always be a bit of a “gut-check” moment, but sitting through that potential “unknown” is a lot easier when you’ve truly accepted the risk you put on the table.
Running low on sleep, but excited to see how things unfold, our game plan heading into the open was to take profits on our positions into this strength. We got the gap higher we were looking for, and after a solid push we were able to close our put credit spread (and a few other AMZN positions, see below) for a combined net profit over $25,000. What a ride!
This trade was a big test of patience and discipline, but ultimately it was a focus on the setup, and not the P&L, that allowed us to be in a position to take profits this morning. With this trade finally in the books, there’s no time to celebrate as we think there’s still some opportunity left here with this weekly squeeze (which still has yet to fire long!)
While the weekly structure of AMZN, along with the weekly squeeze in QQQ, suggests the potential for more upside over the next handful of weeks, this morning’s move brought AMZN to +3 average true range (ATR) on the daily charts, which in our book is a great spot to lock in gains and prepare for the next “ideal entry.”
Amazon’s next move will likely be dictated by where the markets go from here, but as far as the next ideal entry, we’ll be looking for a pullback to the daily 8 EMA as our next “buy-zone.” A new entry at a daily buy-zone, with a daily/weekly squeeze setting up in the QQQ could certainly lead to our next big trade just around the corner. For now, we’ll discuss the potential of an iron condor in Sunday’s upcoming newsletter, and then dive a little bit deeper into what we’re seeing from the markets.
Congrats to all who practiced patience and took this trade along with us. NEXT!