A Dear Market Requires Careful Contemplation

October 3, 2017

Mish's Daily

By Mish Schneider


blankIf you do not own any stocks by now, you could be suffering from FOMO-fear of missing out.

For example, certain stocks just made new highs that might still look attractive yet may not offer new investors a great risk/reward.

Furthermore, certain stocks that I watch made new multi-year lows and reversed today with robust option buying.

That means that whether you want to buy a stock going parabolic or one that has reversed from the lows, there are two important questions to ask yourself.

First question: How does the macro picture look?

In other words, do you think the overall market will continue to rise? Plus, how does the sector of the stock you want to buy look?

OK-It’s really one broad question with sub-questions.

Our photo depicts this perfectly.

The subject contemplates both bright clouds and those dense with rain.

Please, if you will, picture me the hummingbird whispering in your ear.

What is the second question and which specific stocks exemplify my point?

No matter what condition the market or the specific sector of the market is in, always wise to ask:

What is the amount of risk I am willing or should take compared to the reward I can reasonably make?

In other words, you must determine the timeframe of your trade. Day trade? Mini Swing? Position Swing?

Beginning with General Motors (GM), today it made a new all-time high. A parabolic move if ever I saw one!

Let’s say you missed the move from 33.00, 35.00 or even 37.00-all places it broke out from.

Today it traded as high as 43.70. You just started to pay attention. Car sales reported fantastically.

The market is also on new highs. You must believe the move will continue.

The sector GM is in is Consumer Goods. You must also believe that consumers will continue to have the confidence to spend more money. Incidentally, seasonally, this is reputably a good time for that.

Generally speaking, stocks in parabolic mode are best with tighter risks and quicker profit targets. The reason is obvious-any turnaround can hurt badly.

Using that formula, GM might be considered with a tight risk.

A stock that has reversed from multi-year lows today is Kroger (KR). The sector is Grocery Stores.

If you are satisfied that the market is going higher, than the question concerning the sector is simple.

How much does Amazon and online food shopping take away from the old-fashioned grocers?

Should Kroger hold up after its one-day reversal, again you must decide what timeframe is best.

In this case, if KR maintains today’s gains, you might consider buying it with a bigger risk for a larger return.

Not meant as trading recommendations per se, this hummingbird means to persuade you to stop, consider and intelligently decide what to trade whilst the market melts-up.

S&P 500 (SPY) 250 pivotal support with this on new highs. A bit overbought here.

Russell 2000 (IWM) 145 ultimate support but 150 now pivotal with overbought conditions on the daily chart

Dow (DIA) Small gap higher. 225.61 now pivotal as the gap low

Nasdaq (QQQ) Inside day. 145 is big support to hold now as this is still some ways from the recent all-time high.

KRE (Regional Banks) Our Prodigal Son shows up tomorrow on Facebook live to talk about his life and future. For now, 56.00 big support to hold

SMH (Semiconductors) Low volume yet another new all-time high

IYT (Transportation) New highs-we are so so happy!

IBB (Biotechnology) 340-343 resistance with now 337 pivotal support. 332 bigger support

XRT (Retail) 41.75 the 200-DMA (confirmed accumulation day). 42.23 big weekly resistance to clear

IYR (Real Estate) 78.00 huge

XLU (Utilities) 52.00 big support and a decent area to probe long.

GLD (Gold Trust) 120.80 pivotal with a move back over 123.00 much better

GDX (Gold Miners) 22.80 support to hold. A move over 23.53 time to consider.

XME (S&P Metals and Mining) 32.00 key support

USO (US Oil Fund) A weekly close over 10.47 good. 10.00 support. Then 9.80

XLE (Sel Energy Spdr Fd) 68.65 the 200 DMA

OIH (Oil Service Holders) 25.40 should not hold

TAN (Solar Energy) 21.00 major support to hold. Resistance at 22.00. Unconfirmed bullish phase

TLT (iShares 20+ Year Treasuries) 126 resistance with under 123.90 see 122.60 then 119.00

UUP (Dollar Bull) 24.30-40 big area to clear and 24.00 pivotal support

FXI (China) New 2017 highs after holding the 50 DMA

Improve Your Returns With 'Mish's Daily'

Michele'Mish' Schneider

Every day you'll be prepared to trade with:

  • Unique insight into the health and future trends in markets
  • Key trading levels for major ETFs
  • The 'Modern Family' advantage
  • Actionable trading ideas in stocks and ETFs across all asset classes
Subscribe Now!

Leave a Comment or Reply

Your email address will not be published. Required fields are marked *