June 28, 2017
By Mish Schneider
Their positions may rust and collect spider webs.
After closing out Monday with NASDAQ and Semiconductors in unconfirmed Warning Phases and Regional Banks in a confirmed one, Tuesday they all returned to Bullish.
Did you lose some long positions during Tuesday’s sell off?
If so, Wednesday offered some great feedback for you.
I’m not referring to the old adage-trade with the trend. Tuesday looked like a Warning to investors in so many instruments.
We have on many swing positions. In our discretionary model, we lost two using breakeven sell stops.
In other words, before yesterday, we had money in the trades. One got us a partial profit last week.
The other couldn’t quite get us to a profit target, but did give us enough reason to scratch rather take a loss.
Our feedback comes in the way of planning sell stops in case the market tanks again.
Both of the trades we scratched traded at or below the exit points today.
Feedback? At least for one day we look smart to get out for no loss.
The other long positions never stopped us out and are back in the money today.
Feedback? Were we brilliant or are we just lucky for a day?
One of the positions we did not lose, the Brazil ETF or EWZ. After Monday’s setup that got us in, Tuesday it closed against us yet nowhere near our sell stop.
Today, it closed profitably.
Just as you place a sell stop in case of a sell-off, you must also consider how much higher you think the price of the instrument can run.
A MarketGauge illustration of planning a trade, our entry uses daily chart support even though EWZ is in a Distribution Phase.
Our bullish bias stems from a breakout in the monthly chart. We realize that the trend is currently under pressure. But, we like the risk/reward.
All trades start with the premise of risk/reward. Proper position sizing is imperative.
To compensate for the risk, we plan a stop loss under recent consolidation and take only ½ position. Our intention is to add if the phase and the market improves.
Hence the thoughts that go into every trade. And especially now, when the indices, particularly NASDAQ, can go either way.
Don’t let yourself get caught out in the rain.
Before the market surprises you one way or another, keep an oil can around to protect yourself from rust.
And, don’t linger in losing trades long enough for your P&L to attract spiders webs.
S&P 500 (SPY) Quite a comeback over the 10 DMA. That puts it back to 244-245 resistance to clear. 242 pivotal Under 240 not so good
Russell 2000 (IWM) I’d still consider the channel based on how June ends. 142.90 the number to watch. 140 pivotal. 138 support
Dow (DIA) 214 now pivotal. 212 some support. Over 215, onto new highs
Nasdaq (QQQ) Saved by the 50-DMA buyers. 140 pivotal. If fails 137.70 trouble. If clears 142 way better
KRE (Regional Banks) Although it went back into an unconfirmed bullish phase, resistance at 54.75 still vexing
SMH (Semiconductors) Unconfirmed bullish phase. 83.50 needs to hold and at least 84.75 to clear.
IYT (Transportation) Most encouraging looking for more upside. 169.50 first line in the sand to hold
IBB (Biotechnology) Held at 310 perfectly keeping this in the game.
XRT (Retail) 40.00 pivotal-above 41 better
IYR (Real Estate) Failed that channel at 81.50 so now ominous
XLU (Utilities) Exit from utes means confidence. Warranted or not always good to note.
GLD (Gold Trust) Like if holds 118 and clears 120
GDX (Gold Miners) 22.25 held but now doesn’t get interesting until it clears 23.00
XME (S&P Metals and Mining) 29.90 is key on a weekly closing basis
USO (US Oil Fund) 9.00 needs to hold
TAN (Solar Energy) 19.19 should now hold if good. Must close above 20.00 to keep going.
TLT (iShares 20+ Year Treasuries) 126 some support but with Monday’s exhaustion gap could be done for real
UUP (Dollar Bull) Euro flying which I did give you a head’s up on last week. Now, 24.90 resistance
FXI (China) Good setup
Every day you'll be prepared to trade with: