March 3 – Tricky Trading

 

I want to start this report off with a gentle reminder:  I love to trade and I know that others do too, but in times of uncertainty and choppiness ? We do not always have to be invested or in a trade, we can be in cash and waiting for an opportunity that fits our personal trading style.  Some may want to wait for a better, less risky set up. 

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SPX – In the weekend report, I called for a bounce with this reversal.  Scalpers or day traders may want to play this bounce with a stop being raised along the way, but where might this run to?

 

SPX  – With strong short covering & some buying coming in, we could run up to the 50 sma area, but I am seeing us on day 20 of possibly near 40 days daily cycle, so I expect just a bounce.  I was asked, “Alex, this was a big reversal, could we get a V-bottom rocket that just takes off and break to new highs?”  My answer: … 

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My answer: Anything can happen when the markets are showing abnormal movement and extremes, but this looks like the first shot across the bow of a Market top. This next chart was in my weekend report showing another leg down as a valid possibility too. That was only a 1 week drop, and I personally would use the bounce to lighten up if you didn’t with the sell signal a week ago Friday. 

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SPX WEEKLY – This shows my idea of a bounce, and the bulls may get very bullish, and then the next drop could happen just as swiftly & unexpectedly as this last one.  Stay Frosty if you go long the bounce. Note : The next drop could be similar to the blue arrow in 2018.  That could then be an ICL.

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AGAIN, we are also only on day 20, so this isn’t likely to be a dcl. These lows are more likely to be revisited & broken.  I might try to short this bounce if we get up near the 50 sma for a back test, depending on how it looks ( I’d use  SQQQ).   Let me show you something else…

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TQQQ – Take a look at a normal drop into a dcl that sold off hard at the end of 2018. Those bounces were really rather short lived , so stay frosty if you are long. 

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NASDAQ 2000 #1  – Now take a look at the Market TOP in the year 2000. It dropped and also had a high volume reversal on only day 12, much like we have now.  Many may have thought this was THE LOW & ‘Bought that dip’.  What lies ahead for them?  Read the chart please…

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NASDAQ 2000 #2  – The purple line is that reversal, and now you can see what was ahead for them. That one was only a 3 day bounce after the reversal and crash #2 showed up. 

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WTIC  – I am expecting Oil to drop further after a bounce too, but this is a convincing bullish reversal. One thing to take note of is that when OIL put in that dcl & Bounced in early February, you may recall that the XOP did not follow Oil higher. A possible warning sign. Well…

 

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XOP – Notice that the XOP didn’t bounce as much as OIL did in early February.  Well, the XOP reversed Friday, but lagged today, so I’ll be watching these 2 areas along with XLE & OIH, etc. 

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THIS  SECTOR IS A BIT COMPLEX NOW, IT IS NO LONGER A STRAIGHT FORWARD SET UP, SO ALL WE CAN DO IS ANALYZE IT DAY BY DAY AND LOOK FOR CLUES.  USUALLY WE WOULD GO BY WHAT GOLD IS GOING, AND SEE HOW GDX IS FOLLOWING IT.   CURRENTLY GDX IS NOT FOLLOWING GOLD EXACTLY, IT OVERSHOT OR OVER REACTED.  THAT CAN BECOME A FALSE READING, AND GOLD WILL REMAIN OK,  OR MINERS MAY BE LEADING THE WAY & GOLD WILL PLAY CATCH UP SOON.   IN THIS CASE, WE NEED TO CONTINUE TO EXERCISE CAUTION.

LET’S TAKE A LOOK AT THE CHARTS OF GOLD, SILVER, & MINERS AND I WILL EXPLAIN WHAT I AM SEEING AND WHY IT IS A MIXED PICTURE.

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GOLD  – We expected a dip to a dcl soon, since we were on day 27 at that peak.  I thought that we might get above $1700 first, and then drop to a dcl, but then Gold crashed.  The problem is that GOLD did not completely damage the chart (yet).  It is ugly, but not completely broken.  It did reverse right at support. Please read the chart. 

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GOLD  – Even though we could say that this is a dcl and a back test, we need to be alert to the idea that that drop started the selling that could lead to our next ICL in April or May and Miners are leading the way.  THAT would be an excellent buying opportunity. If you got caught in this selling, you can make your money back after the next ICL…

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GOLD  – At this point we have a drop that could be the DCL, but expecting it to just rocket off to new highs is less likely, and when you see what Silver & the Miners are doing, you’ll see why.  So what might we expect?  

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GOLD  – 2 daily cycles that can drop this into a mild ICL could look something like this and give us an ICL in May.  We have to watch how things unfold going forward, and anyone buying the reversal should  keep stops in place.

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SILVER – When you look at the DROP IN SILVER, it looks far less healthy than Gold, slicing right through the 50 sma and breaking all of the recent lows. That looked ugly.

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  GDX & GDXJ resisted the Stock Market sell off Monday, Tuesday, and Wednesday, but  eventually dropped sharply on the final 2 days before putting in a reversal candle on day 31.  This is a broken chart and I would look for a move something like this in a new daily cycle.  

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GDX – There is an outside chance that this is NOT the dcl yet, and that we could bounce & break the lows on light volume for a day 34 or 35 day dcl.  I’m just throwing this out there because we have a trend line.  This idea is discussed just in case we bounce & drop to that line, it won’t panic people too much. See the Magenta box as an example of what I am saying. 

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Questions I am being asked:  I sold all most of my miners when you called the black candle reversal top last Monday, ( or some just got stopped out last week) , Can this  GDX reversal ( possible dcl) be bought?   

Answer:  What is your goal?  1. You can buy it as a trade on a bounce.  2. You can buy it hoping that it just runs away higher, but use a stop along the way, since I don’t think it will.   If you are following my guidance in the weekend report and in this one,  then you should understand that while ‘Anything’ can happen in these unusual moves –  I am expecting a dip down into an ICL over time.    You are either buying it as a trade or scalp? You are buying it lower & are ok with it dropping even lower?  You are hoping that it just continues higher, so if it doesn’t,  you can trail it using a stop.   

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We are seeing a lot of bounces and there will be trade idea, but after last weeks massive sell off, many may just want to be in cash ( or sell on the bounce & increase cash positions) and watch how this plays out. For the sake of most readers safety, I want to keep trade ideas to a minimum.  I will still have a few here and there, but I do want to admonish caution & maybe small position sizes, until we see how things play out.    I do not want to over-tempt people back into the water with possibly a second wave to the tsunami coming. 

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Enjoy your Tuesday trading or time spent on the sidelines observing the market action!

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~ALEX 

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Some Biotechs did not get crushed in the market sell off.

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INO – I’ve been watching INO climb the 50 sma. This was Feb 13.  Last week I mentioned a possible buy if it drops to that area & reverses…

 

INO –  It didn’t get crushed in the sell off, and it reversed yesterday near the 34 sma, So I took a position in it.  INO   dipped, tagged that 34 sma, and reversed higher. It traded as high as $6 recently, so I want to see if this will climb there again.  Earnings are possibly due out on March 12th and biotech can have BIG reactions up or down with earnings, so be aware of that.  THIS IS A SMALLER POSITION, BIOTECHS HAVE THEIR OWN RISKS. 

 

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LPTX – I was also watching this last week and bought this break since it didn’t sell off with the market crash.  It is choppy and difficult, but it also went from $0.60 to $3.20 in 3+ months. This just popped from $1.80 to $3.20 in Feb alone.   I think it can quickly shoot to $3.50.  Let me show you the bigger picture…

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LPTX  – It could get to $3.50 on this pop and I will sell 1/2 if it does. 

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COSTCO   is getting some attention in the news as they report long lines & that they are running out of  various supplies repeatedly ( as people prepare for the coronavirus).  They report a run on their stores and that crowds are wiping out toilet paper, cleaning supplies, hand sanitizer, etc. from the shelves.   The gap down & gap back up is known as an very bullish Abandoned baby. Those gaps often don’t fill right away. 

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CLX  – Clorox also slammed down Friday and recovered Monday  ( cleaner / disinfectant).  It did ignore the whole market sell off until Friday.  If you are thinking, “ I can’t buy it now with that large of a reversal / recovery.” – I agree, because yes, it could just rip higher, but you’re also thinking that you might enter here and as soon as you do – it’ll pull back $10.    THAT IS THE POINT.  Put it on a watch list and if it does pull back $10,  THEN you may find that entry. 🙂