One More Push to New Highs?

2021-05-27 | Taylor Horton

The summer is quickly approaching, which can often be a time where the markets are sloppy at best. However, there are a handful of reasons to believe the market is setting up for another push into new highs over the next 1-2 weeks.

With bullish trends fully intact on the weekly charts, both the $SPY & $QQQ have developed a bullish structure to their daily charts that point towards a move to the upside just around the corner. The $SPY is coiled nicely in a tight daily squeeze, while the $QQQ has regained a bullish structure to its daily chart as well.

Over the next 1-2 weeks, I’ll be looking for these squeezes in the indexes to fire to the upside, which should be good for a move into (at least) the 2+ ATR extensions on the daily charts. With the potential for solid upside momentum from the indexes, there is the same potential for individual stocks, especially those with key proprietary setups. Oftentimes, our best swing trading will happen when we can pair a  setup in an individual stock, with an overall market setting up to fire its own squeeze.

For the tech stocks, my focus over the last few weeks has been on the $GOOGL daily squeeze, where I sold a put credit spread for 6/18 expiration. Thus far, that squeeze is unfolding nicely and a push into the 2+ ATR extensions doesn’t seem far off at this point. While $GOOGL is a bit too extended here for a new entry, $MSFT offers a fresh daily squeeze and is trading closer to its 21EMA, making it a better candidate for an entry at this point. Should the indexes fire their squeezes to the upside, look for $MSFT to follow along and make its own push to the 2+ ATR extension.

Outside of tech, other sectors should see some solid upside over the next handful of weeks as well. The industrial sector ($XLI) has a great uptrend, and has recently formed a fresh daily squeeze. With the potential wind of the overall market at it’s back, I’ll be looking for the industrial sector (and stocks within the sector) to see higher prices here shortly. $CAT is my favorite of the industrial-bunch at the moment, and I have a position in a 6/11 put credit spread locked n’ loaded.

It’s always important to remember that the markets will do what the markets want to do. While the current structure across-the-board points towards a move higher, always remain flexible in your thinking/trading and be ready for whatever the markets throw your way.