The markets opened up Monday morning with a bang, with the SPX gapping up 22 points from Friday’s close of 2348. Any concern for the French election negatively affecting the markets was assuaged, as the market raced higher. A daily squeeze fired long and we traded in a range of 2370 up to 2398. We continued trading higher throughout the week, with a high reached at 2398 before we started chopping around. We got a quiet close on Friday to end the month of April, as the markets look in the near-term exhausted. The markets are sitting just below key resistance levels which is the fatigue we’ve been seeing.
Our options traders focused largely on earnings this week, making plays in major companies such as $WYNN, $AMZN, $HD, $GOOGL, $MSFT and $SBUX and many more. Check out this blog for more information on how our options traders approach earnings: Earnings Season. Next week we have earnings in $AMD, $MRK, $AAPL, $FB, $TSLA that I’m sure will be on our traders’ radars.
Additional plays made in our chat rooms revolved around our Triple Squeeze setups, and what John calls the ‘Honey Badger’ stocks – the stocks that just don’t care what the overall market is doing.
Sentiment for Next Week:
Let’s check in with our traders to see where their heads are at going into next week. After this bullish week, let’s see where they stand.
JC – While the weekly charts remain bullish, the daily charts look exhausted. How would you feel after running a marathon? Does that mean it is time to short? No thanks. Could we still keep grinding higher? Absolutely. This is the kind of market where I don’t see any edge in making a big directional bet. I like unique circumstances (SNAP is the new flight to quality?), selling premium, and cash. Keep the gun loaded and the mind clear for the next elephant to walk by…
Henry – Buying the gap up on Monday has worked well this week, but I am focusing on taking profits here and see if the bullish trend would like to rest into next week. HD had a great move and I’ll continue to focus on top-down sector analysis while also spending some time with earnings.
Chris – I think the SPX has made a temporary top. I would look to the /EMD. If it can’t continue rallying, then I see the /ES going to the 2350 level.
Bruce – I am slighlty bullish – next week we have AAPL and TSLA reporting zmong others, so expect some movement
Tony– Wall street has no competition for investment monies from the treasury marked. With interest-rate’s at historically low levels if you’re not long the stock market you’re wrong
Carolyn – I’m pretty much in a “protect” mode as far as the indices are concerned. This means protect profits on longs because I have Fibonacci timing cycles that are suggesting at least a pause in the recent rally. We have this along with the fact that the SPX has met some key upside extensions in price. The fact that we are extended tells us that we are in a place where the recent rallies can terminate if only temporarily!!
Raghee – I am seller as long as we are below 2400. I am still short the Dow from 20995 with a downside target of 20,755 then 20.455. With the S&P I’ll scale out at 2365. This is distribution chop with a bullish bias which means RESPECT THE TREND THAT WAS while taking nimble shorts in this overbought environment.
David – I have long expected that the decline from the March first high in the S&P 500 was only corrective. But the objective of a new high is almost here and after that all bets are off. And while I prefer a scenario where we continue uo toward 2475, there is no way to rule out a multi-month consolidation first.
The broader uptrend is not over. But competing scenarios make this a tough spot to try and participate. For those already positioned long, a new high would warn to tighten stops.
John Clayburg – Well, the bear and the bull sat on the log all week with the bear slowly sliding off the wrong end.
Thursday afternoon the beleaguered bear slowly wiped the tears from his blurry eyes and stumbled back into the woods to chew some more wacky weed.
As the bull was charging up the next hill he heard in the distance a bear growling “Earnings! French ! Whiskey Tango Foxtrot! ”
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.
Expert: Chris Brecher
Trade Date: April 24th, 2017
Setup: Bullish setup on Sarepta Therapeutics. We have a squeeze on a weekly and a daily, at support. Chris loves the bullish triangle plus earnings, and the expected move is gigantic, though earnings doesn’t usually move much. The idea is that if you go on the premise that the stock will break out to areas of resistance, then you can place a butterfly there to take advantage of this setup with a very favorable risk/reward setup.
Strategy: Placing a butterfly with your short strike at overhead resistance while looking for a price breakout, gives you the optimal risk/reward scenario, in which you’re risking $1.00 per contract, to make $2.00 – double on your money – if price stays between $34-38 after the announcement.
Target Exit Price: With earnings trades, Chris likes to exit right at market open after the announcement. Ideally, he wants to see price action at the middle strike of the butterfly ($36).
Stop loss: As an earnings trade, this trade will either work or it won’t. Price falling below $33 or above $39 would equate to a loss, and you’re only risking the premium that you’ve paid.
So how did the trade play out?
$SRPT 30-minute Chart – April 28th, 2017
As you can see, price gapped up on the earnings announcement, which allowed Chris to make 100% on his money when he took off the butterfly at market open. For earnings trades, he likes to take these off directly after the event. Watching price action play out the rest of the week, you can see that price stuck right around his strike of 36. The butterfly he took off for $2.20 this morning was trading around $3.50 by market close, landing perfectly at his chosen strike price.
That’s all for now!
PS: The Early-Bird discount for our Live Trading Mentorship in Austin ends this Sunday, April 30th. And, if you call the office at 512-266-8659 and tell them that Danielle sent you, they’ll hook you up with an additional discount and some sweet bonuses. Hope to see you in Austin!