The Next Market Leaders - 1/5
The markets got smacked today and took a turn for the worst after the Fed minutes released at 2pm were more hawkish stand than most were expecting. The central bank is clearly nervous about high inflation numbers, indicating earlier hikes to interest rates and a more aggressive pace of tapering purchases/lowering their balance sheets.
Long story short, this is not good at all for growth stocks. Most of my long positions either sold early or stopped out in the drop (some picks here were working great for us like F and NUE), and short positions are paying big. It’s best for most to sit out and wait for better market conditions. For the past few weeks, long or short, you have needed to be extremely quick in order to make money. That’s generally not my trading style, but I do what the market tells me is best.
Today we’ll cover a few potential short setups as long setups will need at least a few days or weeks to recover and build proper buy points.
Index Updates
The Nasdaq hit resistance last week and didn’t bring back the high buy-volume this week that we were looking for. Instead, sell-volume came in droves and the index cruised below the 50-day moving average. It looks headed down to test the horizontal support from a few weeks ago, and below that is the 200-day MA.
The S&P 500 hit all-time highs yesterday, which feels like a mile away now. Today it got crushed and fell back into the base. It looks like it will test its 50-day MA for support and ascending trendline in orange below that is the next support.
Recent Moves
I haven’t posted all my moves on Twitter this week because this market is moving incredibly fast and it’s hard to keep up. I’ll admit that I traded too much this week, and the results were generally poor; I’ll buy a long and see a decent 3-5% profit, then I blink and it’s gone. If you’re feeling chopped around, you’re not alone, and that’s why it’s best to be mostly cash at this point. That being said, I took a few juicy shorts that put my portfolio just over even on the week/year.
F - Bought and sold for 11% gain
MU - Sold remaining half for 4% gain
AA - Sold for 1% gain, should’ve locked in more here
SM - Bought and sold break even
AMD - Sold for 2% loss
LAC - Bought on breakout and sold today for 2% loss
GS - Bought and sold for a 1% loss
TQQQ - Bought and sold for 2% loss
Short Positions Opened Today:
FB - Sold Short at $332, it has dropped to $323 already
OKTA - Sold Short at $206, it has dropped to $198 already
Open Positions
Nucor Corp (NUE) was in my 12/19 report and crossed through the buy point just 2 minutes after the bell this morning on heavy volume. I bought it at $121.50 and it raced up to $126.50 before selling off amid the decline. It looked like a big potential winner up until then. I sold half my position for a small profit around $123, and moved my stops to even on the other half.
Facebook/Meta (FB) is one I short-sold at $332 as it was breaking below it’s 50-day MA on volume and tech was selling off. It closed $9 lower. My target is $300-$310 to close half of the position with stops now up to even.
OKTA was another short sell at $206 as it was breaking below a bear flag pattern. It looked similar to other tech stocks that have gotten crushed lately like AFRM, CRWD, and DASH, so I took a big size on it. It’s down $8 already and my stops are now at even.
Short Setups
Doximity (DOCS) is setting up a bear flag pattern and is very close to breaking through it. I actually already picked up a 1/2 position in anticipation of a gap-down tomorrow, and I’ll add to it if/when it tests the trendline around $49 as resistance. If it doesn’t gap down, consider shorting it if it sells through $49 on volume. Use the 30-minute chart tomorrow morning to get more detail.
RingCentral (RNG) is another tech stock that’s been getting crushed. Consider shorting some on a break below $173 on heavy volume with buy stops $4 higher.
Other Stocks
Ford (F) has been on our radar for several weeks and I noted in previous issues to buy a breakout of $21 on high volume and add to it at a breakout of $21.50. The stock hit both our levels on Tuesday and topped out at a 15% gain today, but I sold mine for an average of 11% gain. It’s still 9% above the buy point. If you’re still holding, reduce and raise your stops to even at least.
That’s all for tonight! More setups should present themselves in the next few days as the market digests this drop. Most stocks that are worth shorting will need a bit of a bounce before considering them as they are too far extended to the downside. If you prefer not to short or don’t have much experience with it - take a few days off or just watch the market while sitting on your hands. Protecting your capital is the most important thing you can do in this environment.
Be careful out there this week. See you back here on Sunday night for an update on our stocks!