Alex's daily Market update & Focuslist - 12/05
The market could not follow through on Friday's bounce
Good evening folks!
That was a rough day in the market as we could not follow through on Friday’s reversal.
Part of the game, now let’s see if the market wants to roll over or if we are looking at a healthy pullback.
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Alex ✌️
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GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Today, the action was very disappointing. After a big reversal last Friday, I was expecting a follow-through or at least tight action above the 4050$…but the market was unable to hold its gains and lost the 4050$ and also the 4016$ level I was watching very closely as an important indication of this pullback.
This is the first technical structure red flag for me, especially after Friday’s action…this is an expectation breaker.
I am not saying that we rollover right away, as this still could be a normal pullback. But with this structure break and internal action, I am leaning toward a deeper pullback now.
We are still above the 21 & 50dma and essential support area, so if we break down in the next few days, I will be looking at a potential HIGHER LOW from the October lows as a potential downside target. We’ll take it day by day, level by level.
As usual, we’ll follow price action, but this adds conviction to the uptrend.
On the upside, reclaiming the 4016$ level would be an excellent first step, but to get me engaged again on the long side, I would like to see the 4050$ level reclaimed as well.
Be also careful for a REJECTION of the 4016$ level tomorrow as that would create a perfect short BORS setup.
On the downside, I will be watching closely how we react at the current rally UTL and if we can bounce from it. If we can’t, the 21dma & 3964$ are potential support levels to watch.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
Alex’s TAKEAWAYS
Today was an expectation breaker after Friday’s bounce. Here are a few observations to explain why I closed all my long positions today and flipped to a more defensive stance until we get more confirmation.
Some observations:
Key levels break on ES_F (4016$) & sitting on rally UTL
Apart from a few leading stocks, there were some real damages today in my WL/FL/UL. Big moves.
Feedback from my PF positions as many stopped me out.
VIX bounce & sitting at channel DTL & 10dma
DXY 105$ base reclaim
10Y 2nd 3.5% area bounce attempt
False breakout on the breadth (20,50,200)
Stocks > 20&50 were already in the upper range of their extension, so a false breakout & UTL breakdown has more weight IMO.
Leading sectors SMH, TAN, XLV, ITA, etc. acted well in general
Many stage 1 base breakouts in important groups I identified yesterday failed today.
Like always, I’m always staying alert if the conditions were to change. One step at a time using progressive exposure!
Gameplan:
After today’s break, I will need more information to decide on the direction of this market. The trend is still up, but this kind of re-entry into a base area after a false breakout is usually a sign of more pressure ahead.
So I plan to keep trying the short side until I get the confirmation that this PB is being supported and we see more names setting up.
How fast can a plan change, right…!
PORTFOLIO UPDATE
INTRADAY/CLOSED TRADES:
LONG PRIME LIST
CPRX 17.55, LSCC 71.74,
CPRX 0.00%↑
A potential leading name I traded last week had a nice bounce at the 10dma today. This could be an excellent entry on the base & 10dma retest following the false breakout.
UPDATE: I lost my position with today’s action, so if the market bounces tomorrow, that’s a name that I will want to get back in.
LSCC 0.00%↑
Another name that I lost today, and I will be looking to re-enter if the market bounces. I still like the inside day today after retesting the recent base level. It has done nothing wrong, but I closed it to control my exposure and risk.
🎖️ = Alex’s highest conviction setups
IMPORTANT NOTE:
I have the discipline to build a detailed FocusList each night, but I want to emphasize that I DON’T take all the trades that would trigger their entry. Some reasons to take a specific position over another or not take any trade, even if the alert is activated, are:
The general market price action
My Market-Based exposure model
My Portfolio-based exposure model (progressive exposure)
A high-conviction setup
Price action around the entry pivot
STOP LOSS:
Recent swing low pivot
For less active trading, you can use the recent swing low pivot as a good structure level to place your SL, but consider that the distance with the entry is more significant. You need to adjust your position size to keep the trade risk as a % of your portfolio, ideally below 0.5% or even 0.25% when the market conditions are not perfect.
LOD (Low Of Day) / HOD (High Of Day)
I like to use the LOD of the day I enter the trade. This way, I can use a larger position for the same trade risk as a % of my portfolio. BUT requires more active trade management and expects to be taken out more often (lower hit rate).
Then even if I take a trade at the entry pivot, I will very often sell it right away if the market roll over or the stock is backing out of the gate. I prefer to re-enter on the entry pivot reclaim than to be stuck with a larger loss. Please study all my education articles closely to learn how I handle trades around these entry pivots.
SECTORS PERFORMANCE
Leading sectors
(XLE) Energy - A pivotal day for XLE again tomorrow.
DTL breakout = upside
UTL breakdown = downside (WINNER)
(SMH) Semiconductors - Is still acting very constructive with another 10dma & DTL retest today. We are still in the support area. TOP 3 sectors RS today
(TAN) Solar - We have to reclaim the 83.10$ level on TAN tomorrow. Be careful of that neckline UTL for a potential breakdown here.
(XME) Metals & Mining - talk about a failed stage 1 base breakout… disappointing
(ITA) Aerospace & Defense - Came into the support area, but still constructive as it was ST extended. It need to base a bit before making the real ATH breakout IMO.
On watch:
(XBI) Biotech - It begins to be a lot of false breakouts here for XBI… I’m not too fond of that wide & lose action on those attempts. I was expecting a follow-through today, which we didn’t have.
(IGV) Software - 2nd false breakout and now back into stage 1 base. Not looking good
(XLV) Healthcare - Still building near ATH and acting constructively. LEADING SECTOR today.
(XRT) Retail - Failed stage 1 base breakout and at risk of returning in the base.
(XLF) Financial - Another failed stage 1 base breakout on volume. Neckline UTL breakdown
(ITB) Home Construction - Still in that support area and has not failed the stage 1 base breakout. (yet) Excellent support at the 10dma.
MARKET BREADTH & INTERNALS (RISK MODEL)
NYHL (New 52W Highs - Lows) - Continue the last 2-day downtrend and is now barely positive. (but still positive:))
Trend @ +4.5 (⬆️)
NYAD (Net Adv/Decl) - One of the most powerful down thrusts of the year @ 2213 net declines.
20dma @ +218 (⬇️)
MMTH (Stocks > 200dma - LT breadth) - Well, that didn’t last long, potentially FAILED stage 1 base breakout as we return to the area today.
MMFI (Stocks > 50dma - MT breadth) - Most concerning breadth chart IMO. Failed breakout of the recent swing high pivot and the 10dma & UTL neckline breakdown.
MMTW (Stocks > 20dma - ST breadth) - Breaking down from the recent wedge formation with today’s UTL breakdown.
VIX (Volatility S&P 500) - Tomorrow will be VERY IMPORTANT. We gapped up & rallied today from the multi-month support area where all rallies stopped. If we breakout from that channel, DTL & 10dma will be in trouble
DXY (US $) - This is getting concerning as we reclaim the multi-month 105$ base area. We are making a potential U&R setup if we follow through tomorrow. Knowing the Market/US$ correlation lately, this is not good for equities if we rally here.
US10Y/TNX (US 10Y bond yield) - Still inside day, but 2nd bounce attempt at 3.5% level. I’m watching closely if we reclaim that 10dma and the 3.67% level, that would be problematic for a potential rally here as well.
ECONOMIC & EARNINGS CALENDAR
PRIME MODEL SPREADSHEET (PT_database)
Access to the PT_database 👇
LEADERS LIST
Overall leaders (PRIME Score)
AEHR,PDD,TGTX,RCUS,PRTA,GPS,CHGG,VCYT,ELF,IGT,LSCC,ALGM,CPRX,YMM,GMAB,CELH,RLX,NTNX,PFGC,CHWY,
Fundamental leaders (FA Score)
NOG,PSX,FRO,PR,ESTE,CALM,PDCE,RUN,MUR,HGV,HP,ERF,GFS,STNG,JXN,LBRT,DVAX,SPWR,PDD,CEIX,
Technical leaders (TA Score)
AEHR,RLX,GPS,RCUS,TGTX,PRTA,VCYT,PDD,ALGM,LSCC,CHWY,NTNX,IGT,ELF,CHGG,CPRX,GMAB,VIPS,YMM,CELH,
Relative Strength 1 Month (1M-RS)
XPEV,RLX,YMM,VIPS,APPS,BZ,IQ,RCUS,PDD,SABR,TGTX,BIDU,SHLS,LSCC,SPWR,JD,AMC,BAND,CELH,AEHR,
Relative Strength 3 Month (3M-RS)
PRTA,RLX,AEHR,GPS,HZNP,BIIB,WFRD,RCUS,VCYT,ALGM,IGT,RCL,ELF,BAND,CHGG,TGTX,CCRN,AER,CHX,SLVM,
Relative Strength 6 Month (6M-RS)
AEHR,PRTA,CPRX,TGTX,ELF,NTNX,CCRN,YPF,INSW,CELH,PDD,DHT,VCYT,ENPH,GPS,CHWY,RCUS,GMAB,ARRY,BIIB,
REFERENCES
Articles on the system:
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