At the beginning of this short week, our traders were collectively neutral on the overall market and as we reach the end of this “Friday,” despite today’s events and the news of Afghanistan, they are largely the same…
John– As we go into a long weekend, it’s not about the natural ebbs and flows of the market – it’s about who’s more concerned holding positions into the long weekend? Shorts or longs? It’s very rare as traders that we get three day weekends and I don’t want to spend all weekend worrying how the market is going to open. I want to go in lite, very close to flat, and just come in swinging on Monday. Here’s my three-day weekend rule – a three-day weekend is a great opportunity to clean the proverbial slate. Every once and a while, give yourself the gift of going flat and long weekends are a great time to do that. Overall I want to be about 75% cash, reducing long exposure. Bulls just aren’t cutting the mustard. It’s not time to get short but I don’t want to be aggressively long either.
Henry – I am playing markets to the long side while avoiding the indices. Finding standout stocks has been a helpful idea for the first bit of this year, and I’m going to continue to focus on tickers like $AMZN, $V, $CMG and ideally $HD.
Chris – The SPX looks to test 2300 support.
Tony – 38 years in the business what I know about Wall Street and interest rates is this. Wall Street has always loved low interest rates. Interest rates have been at historically low levels since 2008 and the stock market has soared. Nothing has changed. Interest rates remain at historically low levels. I am looking for more new all-time highs.
Tucker – The $SPX continued to be very choppy this week. Looking for that to continue next week, unless something crazy happens with Russia, Syria or North Korea. The Squeeze has been on for four days on the $SPX daily chart. I think it is 50/50 whether it fires long or short. It still isn’t time to go completely short, yet. Pick your long and short trades very carefully. If you are nervous, then you are too heavily invested. Lighten the load.
Carolyn – We are still torn between the March 1 time/price high in the S&P and the 3/27 time and price low. I must call myself neutral at this point. We need a breakout one way or another.
David – I have been maintaining the view that the S&P 500 has been in a correction since March 1st and, therefore, it should eventually turn back up. I continue to believe that is the likely outcome and, at this point, it looks like the correction is taking the form of a triangle. That should mean it continues to consolidate into a wedge before continuing up.
Trade of the Week Follow Up:
As we look back on the week, let’s check out how our Simpler Trading – Trade of the Week is playing out. Reviewing why the traders have chosen these trades, the method behind how they read the charts, and how they played out over time is one of the best ways to become familiar with the setups we use and why we use them. Check out the summary below. In case you missed it, click here to check out our Trade of the Week.
Trader: John Carter
Trade Date: April 10th, 2017
Setup: 195-minute bullish squeeze
Strategy: John chose to sell a put credit spread to capture premium decay with hopes that $BABA would push higher with the 195-minute squeeze. He chose a conservative put credit spread (versus loading up on calls) because $BABA was a bit extended and close to resistance, however he still wanted to play it to the long side.
Trade: SOLD -20 VERTICAL 21 APR 17 110/105 PUT @ $1.25
Target Exit Price: 80% of max profit of the initial credit on the spread. He would like to buy back the spread for $0.25.
Stop loss: With a spread, you can give it more flexibility but on the stop loss, I will get out if the setup is no longer valid. A close below the 21 EMA at $108. Which would get you out around $2.20, creating a 1:1 risk/reward ratio on the trade.
$BABA 195-minute Entry Chart – April 10th, 2017
Check out the chart below. When John entered the trade, you can see that price was a bit extended from the 21 EMA at $108.11, as well as having a tree line up ahead at $112.00. However, the momentum on the 195-minute squeeze had shifted from red to yellow, and his bet was that the squeeze was going to fire long soon.
So how did the trade play out?
$BABA 195-minute Chart – April 13th, 2017
As you can see, the 195-minute squeeze did fire long, and price did stop very close to resistance at $112.10.
As of Thursday’s close, John was still holding his put credit spread with his GTC order to buy back the spread at $0.25, hoping for more theta decay over the long weekend. Right now, the spread is at $0.88, and is benefiting from price action and theta decay nicely.