Alex's daily Market update & Focuslist - 02/20
The market found support on Friday, but it still has a lot to prove
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Alex ✌️🙏
GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
Last Friday was OPEX, and the market did manage to hold and find support at important levels we identified last week. ES_F opened on a gap down, quickly sold off but found support at the 4056$ level we could hold all day. We finally rallied at the end of the day and closed in the upper range, just below the 21dma.
I think we are still in a critical spot right now. This consolidation looks more & more like a bull flag/channel as Friday respected the lower DTL…but the risk of a rollover or deeper pullback is still there, and I have to respect that risk. We are now below the 10 & 21dma.
The next few days should give us a lot of information on the direction of this market. Until then, we have to remain careful, IMO.
On the upside,
We must reclaim the 4109$ level and the 10dma before engaging in that market again. Watch closely for a rejection of those levels, which would be a bearish scenario.
On the downside,
The 4056$ level and the channel bottom DTL are the levels I’ll watch again tomorrow for potential support. Then if things really rollover, the 4016$ level along the 50dma might be the next lower support.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
Alex’s TAKEAWAYS
Friday, the market found support at the 21dma, potential channel bottom DTL, and recent structure. This was OPEX, and I don’t know how much it affected the price action.
I remain cautious even if the market found feeble support Friday, and some internal red flags we had on Thursday night got reversals (DXY, 10Y, VIX, etc.). We are at a critical spot right now, and we must wait for more information to really asses the health or not of this current consolidation.
I remain optimistic about the intermediate-term uptrend but aware that we might have more downside in the short term. So our job as swing traders is to wait for a high-probability window to get engaged.
Some observations:
Indices:
NQ_F is back 5.7% above the 50dma.
Indices are at the bottom levels of their channel and now below the 10 & 21dma
Breadth/Internals:
Breadth is weakening
VIX reversal at the 50dma, but still above the 10&21dma and the base support area.
Stocks above 20/50/200dma continue their downtrend.
DXY reversal on Friday. Can we follow through and break kma’s?
Credit Spreads Back inside wedge DTL on volume, but I need confirmation and more information here.
McClellan's summation index (MT_SIGNAL) on a DOWNTREND signal. - CAUTION
Sectors:
Some sectors like XBI, XRT & XME are looking to build nicely on the right side and showing great support Friday.
XLE is a potential short setup with Friday’s UTL break
SMH & IGV are holding their 21dma and key areas. We really need to hold here.
TAN is very weak again.
Individual names:
Many names still hold well, while others build a promising setup. I am not seeing the destruction we saw a few months back. This action is giving me confidence and optimism about the intermediate-term trend.
Market health & Trend indicators:
IT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
ST_SIGNAL: downtrend (red) + BELOW 10dma = SHORT-TERM DOWNTREND (🟥)
Tomorrow's economic news/events:
GAME PLAN:
The market bounced Friday, but it was OPEX, and we still have many red flags to respect.
I am now on the sidelines, as with that bounce on Friday and my intermediate-term bullish bias, I didn’t want to expose myself to a gap-up over a long weekend. So I closed my SQQQ trade with a small gain on Friday.
I am now in a small drawdown, and I don’t want to build exposure and get my open heat too high, so I’ll go back to my 2022 playbook and be very tactical with my trades in the following days until I get back to my equity ATH.
Take one trade at a time, and be strict with progressive exposure.
Sell into strength very quickly intraday and take a least 1/2 off by EOD (day #1)
Use very tight SL
So you will see me be pretty active with my trades in the next few days, at least until I’m out of my drawdown or the market confirms a reversal and we begin to see way more traction on our positions than we’ve seen in the last few weeks.
Obviously, if the market does not bounce, I will remain in my cash position and won’t even trade.
EXPOSURE MODEL:
FOCUSLIST (LONG)
VTYX 44.98, ATKR 148.11, META 175.85, ERY 30.98, SSTK DTL,
VTYX (BO10PB) - Alert: 44.98, SL: 42.89 / LOD
Riskier biotech still in clinical stage, but by adjusting position size to compensate it's one of the cleanest charts in the sector right now. Along with $XBI 50dma & base area reversal on Friday, this could be an excellent biotech play.
ATKR (BO10PB) - Alert: 148.11, SL: 144.77 / LOD
20% EP from earnings catalyst that led to a multi-month base breakout. We are forming the first pullback at the 10dma along higher lows and a tight volume profile on the right side.
META (BO21PB) - Alert: 175.85, SL: 169.7 / LOD
Strongest mega-cap with a 25% EP on recent earnings. Since then, we consolidated in a wedge with tightening price & volume action. We are retesting the 21dma, and I'll look at the recent swing high pivot for an entry.
ERY (WB) - Alert: 30.98, SL: 29.61 / LOD
This 2X short ETF is a great way to play the POTENTIAL Energy $XLE top. We've seen a 3rd rejection, followed by a lower rejection (LH) at 90.46$, which led to the last few week's UTL breakdown on Friday.
SSTK (BO10PB) - Alert: DTL, SL: - / LOD
Very strong stock with a 60+% initial run, and we are now building a consolidation with higher lows at the 10dma. I’ll look at the DTL breakout to initiate. Building the last contraction might need more time, but I’ll monitor it closely in the FL.
PORTFOLIO UPDATE
100% cash
INTRADAY/CLOSED TRADES (Included in Discord membership):
SECTORS PERFORMANCE
Leading sectors:
SMH Semiconductors - We gapped down as expected on Friday and found support at the 21dma and recent base structure. We are also at the current bull channel bottom DTL, which we really need to hold for this bullish consolidation thesis to remain valid.
TAN Solar - Broke the inside day pattern on the downside Friday and confirmed the kma’s rejection s well. We are still above the recent swing low and 73.94$ level, but I’m not too fond of the look of this chart.
XBI Biotech - Interesting reversal. We made a new low below the 50dma on Friday’s open but quickly reclaimed it along the 85$ base top level and the 86.18 recent consolidation pivot. We are now at the 21dma with a bullish reversal in a big sector.
XLE Energy - We've seen a 3rd rejection, followed by a lower rejection (LH) at 90.46$ last week, which led to the last few week's UTL breakdown on Friday... We are still in the base area, but with that UTL break, this is a clear short setup for me, and I would be very careful being long Energy stocks.
XME Metals & Mining - Building nicely on the right side of the chart, holding the 21dma on Friday. In the next few days, I’ll watch for tight action below the 57.16$ pivot.
XRT Retail - Nice hold on last Friday as we bounced from the 10dma and still building higher lows. I’ll look for a reclaim of 71.89$ to confirm continuation — good looking chart.
IGV Software - Very similar chart as SMH. A gap down last Friday and it held the recent structure bottom area and 21dma. We have to hold these levels, but if we do, we remain in this bullish consolidation thesis.
MARKET BREADTH & INTERNALS
$NYHL (Cumulative new 52W Highs/Lows & 50dma)
IT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
!MCSUMNYA (McClellan summation index & 10dma)
We did cross the 10dma, triggering a SHORT-TERM DOWNTREND signal.
ST_SIGNAL: downtrend (red) + BELOW 10dma = SHORT-TERM DOWNTREND (🟥)
$NYMOT (McClellan Oscillator - Breadth extensions)
Retesting the recent lows.
NYHL (New 52W Highs/Lows) - Small decrease Friday, but still positive.
NYAD (Net Adv/Decl) - Still negative.
$NYA200R (Stocks > 200dma - LT breadth) - Follow through on Friday.
$NYA50R (Stocks > 50dma - MT breadth) - Follow through on Friday.
$NYA20R (Stocks > 20dma - ST breadth) - Follow through on Friday.
VIX (Volatility S&P 500) - We gapped above the 50dma on Friday but faded all day to close below and even negative finally. We are not out of the woods and will probably gap up tomorrow, but we see a lower-high structure so far. We need more information.
DXY/TNX (US$) - Reversal on Friday, but we are still above all kma’s, so we also need more information here.
Credit Spreads (IEI/HYG) - We came back in the wedge DTL on volume Friday. Clearly, we are in a critical area, and we need more information to confirm a shakeout or a breakout here.
ECONOMIC & EARNINGS CALENDAR
PRIME MODEL SPREADSHEET (PT_database)
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LEADERS LIST
Overall leaders (PRIME Score)
AEHR,ALGM,TGTX,ELF,MNDY,JXN,FSLY,OSH,ATI,VTYX,NEWR,ASC,BBIO,RXDX,DKNG,AYX,MGNI,LSCC,MBLY,IOT,
Fundamental leaders (FA Score)
EURN,ALB,FRO,NOG,CALM,ASC,ELF,ESTE,RUN,PR,H,LTHM,JXN,CPRX,SPLK,LNTH,ALGM,AEHR,CPE,ARRY,
Technical leaders (TA Score)
TGTX,FSLY,VTYX,ALGM,HIMS,MBLY,AEHR,MNDY,OSH,ELF,BBIO,RXDX,NEWR,MGNI,JXN,ATI,IOT,BAND,DKNG,AYX,
Relative Strength 1 Month (1M-RS)
SI,DKNG,TSLA,BBIO,FSLY,TGTX,MGNI,COIN,LCID,TTD,PLTR,NET,ALGM,ELF,ABNB,TWLO,VTYX,APP,RIVN,MNDY,
Relative Strength 3 Month (3M-RS)
RXDX,TGTX,FSLY,OSH,IOT,VTYX,HIMS,MNDY,MBLY,AYX,ALGM,AEHR,NEWR,FTAI,COIN,TWLO,ATI,TEAM,BBIO,NET,
Relative Strength 6 Month (6M-RS)
RXDX,NINE,TGTX,OII,VTYX,AEHR,ELF,ALGM,RCL,ASC,HIMS,FSLY,ACLX,PRTA,OSH,MBLY,MGNI,STNG,JXN,FTAI,
REFERENCES
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