I spent most of yesterday traveling from my home in Miami Beach to Anaheim, California for the International Online Trading Expo. Upon arriving in California, I was pleasantly surprised to see that both the SPY and LMT longs worked out well and the market followed through to test the high end of the range of July 31.
The critical number to watch on the S&P futures now is the 911 area, which is the high of July 31. If the S&P rallies above that level today and holds, it would indicate a break of the upper channel of the downtrend that has been in place since the middle of May. I would expect buy-side volume to really start to increase if that occurs. However, it is just as likely that the market pops a few points in the morning and fizzles out, effectively forming a double top. So, take it easy with position size for now until we get some confirmation that this rally is for real. You may be able to see a ray of light, but the market is not out of the woods yet.
Today’s watch list:
AMCC – Applied Micro Circuits Company
Trigger = 5.03
Target = 6.05
Stop = 4.60
Notes = I have been tracking this stock for the past couple of weeks waiting for the consolidation to rally above the $5 resistance level and it now looks poised to do so. AMCC is above its 20 and 40 day moving averages, with the 20 MA about to crossover the 40 MA, which is bullish. Confirmation would be an increase in volume upon breaking the $5 mark.
HD – Home Depot
Target = 24.28
Stop = 27.80
Notes = HD has been showing a lot of relative weakness despite the strength in the markets. HD set a new 52-week low intraday on Thursday, but rallied back a bit into the close. I am watching for a break below Thursday’s intraday support level of 26.90.
Deron’s Report Card:
Both longs, LMT and SPY, triggered and are in the money. Stops have been tightened as noted below to lock in profits.
Still short VZ also because it did not hit my stop.
- SPY long – bought 88.65, stop raised to 90.45 OR will sell into any opening gap-up, open with + 2.30
LMT long – bought 65.20, stop raised to 65.95 OR will sell into any opening gap-up, open with + 1.15
VZ short – shorted 29.37, stop 30.35, half position open with (0.33)
Glossary and Notes:
Remember that opening gaps that cause stocks
to trigger immediately on the open carry a higher degree of risk because the
gaps (both up and down) often do not hold. Use caution if trading stocks with
large opening gaps.
Trigger = Exact price that stock must trade
through before I will enter the trade. If a long position, I will only enter the
stock if it trades at the trigger price or higher. For a short position, I will
only enter the stock if it trades at the trigger price or lower. It is really
important to only enter the position if the trigger price is hit, otherwise the
trade becomes riskier.
Target = The anticipated price I am
expecting the stock to go to. However, this does not mean that I will
always hold the stock to that price. If conditions warrant, I will sometimes
take profits before that price, in which case I will notify you of the
Stop = The price at which I will have a physical stop
market order set. As a position becomes profitable, this stop price will often
be adjusted to lock in profits. Again, you will always be notified of such
changes in the next daily report or intraday if you subscribe to intraday
Closed P&L under Deron’s Report Card is based on the actual
price I closed my trade at, not just the theoretical target or stop price listed
for each stock. Open P&L is based on the closing prices of the most recent
Unless otherwise noted, average holding time is 2 days to 2
weeks once a position is triggered. Updates on open positions are provided
Yours in success,
Deron M. Wagner