The broader markets retraced as expected since they were overbought.  Various Indices (and Sector ETFs) performed with different levels of relative strength.

Our open positions are doing great.  We stopped out of one-half position in XPH for a nice gain of $4.87/share (10.9% in 10 weeks). 

IYT is showing relative strength, but have an adjustment on it under Friday’s low.  Crude Oil and energy has been wild, but we are watching those sectors, along with IWM, Internet, Software, Metals, and others.  We have no new recommendations, however, until we get more information.

More...

Dow Jones Industrial Average

Above is the chart of the Dow Jones Industrial Average that we review each week.

The Dow showed the greatest amount of relative strength compared to the other broader market indices last week.

In the chart above, the dates under each candle represent the prior Friday’s candle before last week’s price action.

That Friday’s candle direction typically does follow through to some extent the following week, some more than others.

Last week, the Dow made two attempts to push lower through the Minor Support (mS) level below. Each time buyers stepped up on those dips.

This left two Bottoming Tails (BTs), one on last Monday and one on Friday.

A break below them and the Dow should move down to the area of Major Support (MS) in the 25,600 area.

Above last week’s high, the Dow should take out the prior swing high above. 

ETF Market Overview Video

Trend Matrix


NEW ETF TRADE IDEAS

We have no new recommendations until we get more information and will send a text and e-mail alert if they set up intra-week.

OPEN ETF POSITIONS WITH TRADE UPDATES

8/30:  ITA Trade:   Bought the ETF at $208.84.

Original Technical Setup:   Breakout from higher range bullish consolidation above r20-MA after 100% retracement on the weekly chart, monthly has bullish engulfing after 7-month consolidation in a strong uptrend.

Trade Update:  ITA showed relative strength last week, making a new weekly high as the broader markets retraced.  Under $208.19, we recommend selling the Sep. (9/21) $210 calls around mid-point (closed at $2.10/share) to leg into a covered call and reduce cost basis.

Stop Loss:   $200.43.

Here is a more detailed description of the strategy:

Covered Call (CC).  Defined as Long Stock + Short Call (1 contract for every 100 shares).  Premium received lowers cost basis because selling Extrinsic Value (time decay).  Done to take in money (Premium) which increases probability of profit.  For further discussion on the strategy, please see our video at https://mastertrader.com/option-strategies-series-definitions/

9/4:   XLF – Trade:  Bought the ETF at $28.36.

Original Technical Setup: Pullback to support and the r20-MA after Bullish Wide Range Bar (+WRB) Breakout from bullish multi-week trading range above the major moving averages on the daily and weekly charts, monthly has bullish engulfing.

Trade Update:   XLF triggered and then pulled in to retest the prior Bottoming Tails on support and the r20-MA on the daily chart.  No adjustments needed.

Stop Loss:   $27.60.

6/4:  XLG – Trade:  Bought the ETF at $195.01. 

Original Technical Setup: Bullish consolidation at the high end of a Bullish +WRB, followed by a Bullish Breakdown Failure (+BDF) reversal.

Trade Update:   XLG retraced to support with the broader markets.  Raising stop.

Stop Loss: $203.50.

8/20: XLI – Trade:  Bought the ETF at $76.45. 

Original Technical Setup: Anticipated Breakout after 100% retracement and Bottoming Tail at r20/50-MA weekly, bullish engulfing at r20-MA monthly.

Trade Update:  XLI is consolidating after making new multi-week highs.  The ETF looks great on all time frames, so we are raising stop.

Stop Loss: $76.21.

6/25:  XPH Trade - Bought at $44.46.  

Original Technical Setup: Following a Bullish 2-Bar 180-Reversal after Breakdown Failure on the weekly chart, had a Bullish Engulfing above 20/50-MA after > 100% Retracement and Breakout, plus the monthly chart has been in a multi-year trading range with a price void above (insignificant resistance upon a breakout).

Trade Update:  The ETF retraced as expected because of the overbought weekly and hit our stop for half at $49.33 for a gain of $4.87/share (10.9% in 10 weeks).   No adjustments necessary.

Stop Loss:   $47.49.

8/27:  XTL Trade:   Bought the ETF at $76.74.  

Original Technical Setup:   Bullish Wide Range Bar (+WRB) Breakout from bullish multi-year trading range above the r20-MA on the monthly chart.

Trade Update:  XTL made new weekly highs and then retraced with the broader markets.  No adjustments needed.

Stop Loss:   $70.95.

VIDEO REVIEW OF OPEN AND CLOSED POSITIONS WITH TRADE UPDATES


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All the best,

Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End

Dan Gibby
Chief Options Strategist

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NOTE:  Master Trader will show opening and closing prices of all stock and options trades.  We recommend that all traders and investors use proper share sizing for positions and money management. However, we cannot recommend what that is for your particular trading style, risk tolerance, or account balance.

We urge you to calculate your own share/position size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk. Advanced Management Strategies (AMS) covers in detail foundational and advanced position and money management.

 

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