The statistics state that we are about to embark on the worst two months of the year for stock returns. I say rubbish. How great would it be if Wall Street was trying to enjoy their Hampton summer homes expecting dreadful market returns in June and July only to be met with fear of missing out anxiety.
If you haven’t had a chance yet, I encourage you to read last weeks post titled, This time IS Different. Truth be told, every time is different because circumstances are always in flux. Yet, I think with that the advance in data mining, social media, and derivatives (such as weekly options), the trading patterns that have been successful in the past are getting a makeover. What has remained constant and will continue to do so, as cliche as this sounds, is price action.
I was wrongly bearish two weeks ago and I had some hurtful trades because of it, but after last Friday’s close price was telling me to be bullish. Currently, price is also telling me to be bullish. The SPX is at all time highs, the QQQ’s have recovered all of this years losses, and there are many sectors that are at or near highs. Yes, the IWM is lagging, yes their are divergences ad-naseum, and yes their are comparisons to 2007 floating around, but so what? Is any of that helping your trading? I encourage you to focus on the plethora of stock set-ups that currently exist.
One indicator that has been cited as cause for concern (even by me) is the lack of stock participation as the SPX makes new highs. I am going to offer a new and different perspective on that. I think it’s great that so many stocks are lagging behind because now I can benefit from them playing catch up.
I am not saying that we will go straight up from here and I wouldn’t at all be surprised if we didn’t get some kind of pull-back next week. However, I am more focused on individual stocks right now that I think have huge upside potential. If I was concentrating on a pull-back or remaining stubbornly bearish right now then not only would I be losing money staying short, but I would be missing out on the gains that so many stocks are offering. You know what will happen to those that are going to miss out on those gains? They will end up chasing, which will then further benefit those who were ahead of the curve also allowing them to exit at new highs. Note: Before anyone tweets me some remark about how I am wrong, let me save you the breath. If I am wrong then the market will tell me that and I will once again shift to adjust.
Next week: I will only make one comment regarding the indexes and then will highlight sectors where some great set-ups can be found with a few examples.
Below is the open interest for SPY. Typically, when you see such high call open interest at one strike, price never gets above there or if it does, fails to hold. Luckily for bulls, it’s pretty far away at 195. On any pull-backs, based on a daily chart (not posted) I would look for support right above the gap at 190.95 and then at the gap fill at 190.48. Beneath there 190 and 188.70 might offer support. 
Here are some sectors you should look for stock strength in with some examples.
- Industrials – MMM and PH
- Materials – AA
- Chemicals – LYB, AXLL
- Tech – MU, HPQ
- Staples- LO, TAP
- Healthcare – HSP, JNJ
- Discretionary – GRMN
And here is a couple set-ups with entries and stops. 
Those are just some examples of many. They may not be as sexy as names like AAPL and PCLN, but you can continue to trade those names and still benefit from the lesser known names that are getting some good money flow.
If you are looking for more ideas, as well as commentary, open interest, and set-ups on all the high beta (more fun) stocks consider subscribing.
Tags: health care, industrials, options, spy, stock market, stocks
Summer of Set-ups
The statistics state that we are about to embark on the worst two months of the year for stock returns. I say rubbish. How great would it be if Wall Street was trying to enjoy their Hampton summer homes expecting dreadful market returns in June and July only to be met with fear of missing out anxiety.
If you haven’t had a chance yet, I encourage you to read last weeks post titled, This time IS Different. Truth be told, every time is different because circumstances are always in flux. Yet, I think with that the advance in data mining, social media, and derivatives (such as weekly options), the trading patterns that have been successful in the past are getting a makeover. What has remained constant and will continue to do so, as cliche as this sounds, is price action.
I was wrongly bearish two weeks ago and I had some hurtful trades because of it, but after last Friday’s close price was telling me to be bullish. Currently, price is also telling me to be bullish. The SPX is at all time highs, the QQQ’s have recovered all of this years losses, and there are many sectors that are at or near highs. Yes, the IWM is lagging, yes their are divergences ad-naseum, and yes their are comparisons to 2007 floating around, but so what? Is any of that helping your trading? I encourage you to focus on the plethora of stock set-ups that currently exist.
One indicator that has been cited as cause for concern (even by me) is the lack of stock participation as the SPX makes new highs. I am going to offer a new and different perspective on that. I think it’s great that so many stocks are lagging behind because now I can benefit from them playing catch up.
I am not saying that we will go straight up from here and I wouldn’t at all be surprised if we didn’t get some kind of pull-back next week. However, I am more focused on individual stocks right now that I think have huge upside potential. If I was concentrating on a pull-back or remaining stubbornly bearish right now then not only would I be losing money staying short, but I would be missing out on the gains that so many stocks are offering. You know what will happen to those that are going to miss out on those gains? They will end up chasing, which will then further benefit those who were ahead of the curve also allowing them to exit at new highs. Note: Before anyone tweets me some remark about how I am wrong, let me save you the breath. If I am wrong then the market will tell me that and I will once again shift to adjust.
Next week: I will only make one comment regarding the indexes and then will highlight sectors where some great set-ups can be found with a few examples.
Below is the open interest for SPY. Typically, when you see such high call open interest at one strike, price never gets above there or if it does, fails to hold. Luckily for bulls, it’s pretty far away at 195. On any pull-backs, based on a daily chart (not posted) I would look for support right above the gap at 190.95 and then at the gap fill at 190.48. Beneath there 190 and 188.70 might offer support.
Here are some sectors you should look for stock strength in with some examples.
And here is a couple set-ups with entries and stops.
Those are just some examples of many. They may not be as sexy as names like AAPL and PCLN, but you can continue to trade those names and still benefit from the lesser known names that are getting some good money flow.
If you are looking for more ideas, as well as commentary, open interest, and set-ups on all the high beta (more fun) stocks consider subscribing.
Share this:
Tags: health care, industrials, options, spy, stock market, stocks