Trading PlanIf your only interest in the markets is to make money, you’re missing a big part of the satisfaction of being in the markets. While the foundational analysis of trend, support and resistance don’t change, what influences them always does.

This can create an endless number of variations as to how prices can trend and form reversal and continuation price patterns that dictate our investing and trading decisions. For this reason, technical analysis can be more of an art than a science.

The lack of consistent uniformity in the markets — at all times — will eventually discourage the majority from believing that it is possible to find consistency.

This situation is exacerbated by educators of technical analysis, which includes the media (e.g., CNBC) that promote the indicator-based methodology of analysis.

Through a myriad of Oscillators, Fibonacci retracements, Elliott Waves, Ichimoku Clouds — and the connection of arbitrary dots on a chart that project lines into the future that will predict trend changes, support and resistance — you’ve entered into an episode of the Twilight Zone called “Your Maze of Confusion.”

2018 has had many news-driven influences to jiggle the markets day-to-day. Last week, the news on Friday was sanctions against Turkey. These pushed markets overseas significantly lower as well as the majority of European currencies.

Brazil was the worst hit, down almost 10% on the week, followed by Russia down just over 7 ½% for the week. Mexico, Italy, Spain, Germany, France, Belgium, the UK and other emerging markets fell as well.

While the US broader markets gapped lower Friday morning, by the end of the day most of those broader markets and sectors were little changed on the week.

At the moment, it seems that the US markets are impervious to the negative influences affecting these other markets. In fact, the Transportation Index pushed above its prior high last week and the Retail sector ETF symbol XRT made a new all-time high.

However, what was being bought most aggressively at the end of the week before last was being sold aggressively all of last week; namely, the Consumer Staples sector ETF symbol XLP.

There is no questioning the erratic behavior of the markets this year cause the unusual influences that have occurred. However, the long-term trend continues to be up and our market internal gauges are not waving a bear flag.

That being said, there are sectors to be avoided. This is going to be a defining week for the Internet sector ETF symbol FDN. Two weeks ago it broke its daily uptrend and at the end of last week it formed a Sell Setup.  Be aware of Thursday’s high and Friday’s low as reference points.

 

Dow Jones Industrial Average

 

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

The beginning of the week started out well, but then prices stalled as they reached toward the old resistance area in the 25,800 area.

The S&P 500 was knocking on the door of its old all-time highs as was the NASDAQ 100. The majority of the week was spent churning back and forth at those areas for each of them.

On the other hand, the Dow move lower on Thursday and formed a Breakout Bar Failure (-BBF). In hindsight, that was an early warning but the S&P 500 and the NASDAQ 100 were holding firm. Without their confirmation, the Dow could have been a wiggle. It turned out to be the leader in what was to come Friday.

The news of the sanctions against Turkey, collapsing markets overseas as well as the currencies associated with those markets resulted in the Dow and broader markets gapping lower at the open on Friday.

At the end of the day Friday, the result for the Dow for the week was a decline of just over half of a percent. Other markets actually fared better.

However, we now have some weekly Topping Tail (TT) candles that do signal that sellers took control last week but that’s within the context of an uptrend.

So we’ll see where this goes in the coming week.

This week is the tail end of the earnings season but will not be without some influences. Home Depot (HD) reports on Tuesday, Cisco (CSCO) on Wednesday, and a slew of retailers report Wednesday and Thursday including Walmart (WMT).

Semiconductors Nvidia (NVDA) and Applied Materials (AMAT) are on Thursday and will influence technology. On Friday, Deere (DE) closes the week.

With little movement last week and the height of the vacation season and summer doldrums, finding high probability opportunities was difficult. As we move out of this time of year expect volatility and our trading activity to increase.

 

Market Overview Video

 

NEW STOCK TRADING IDEAS

 

Below is a daily chart of Expedia Group, Inc. (EXPE).

 

 

Trade:  Over $134.56, consider buying stock.

Technical Setup:   Breakout from W formation on Support and r20-MA after Pro Gap Breakout daily.

Stop Loss:  $130.86.

 

Below is a daily chart of TripAdvisor, Inc. (TRIP).

 

 

Trade:  Under $53.90, consider shorting stock.

Technical Setup:  Master Trader Sell Setup and reversal bar at Resistance after bear Pro Gap below d20/50-MA daily.

Stop Loss:  $55.72.

 

Below is a daily chart of Wolverine World Wide, Inc. (WWW).

 

 

Trade:  Over $37.92, consider buying stock.

Technical Setup:  Bullish consolidation after Pro Gap Breakout to all-time highs daily, bullish weekly and monthly.

Stop Loss:  $35.77.

 

Below is a daily chart of Continental Resources, Inc. (CLR).

 

 

Trade:  Over $65.00, consider buying stock.

Technical Setup:  Breakout after huge Bottoming Tail daily and weekly, Master Trader Buy Setup and reversal on the monthly.

Stop Loss:  $63.25.

 

WATCH ITEM:

 

 

NEW OPTION TRADING IDEAS

 

Below is a daily chart of State Street Corporation (STT).

 

Trade:   Under $83.52, consider shorting Sep (9/21) $87.50/92.50 bear call credit spread (39 DTE) for mid-point but a limit of $.65/share (closed at $.72/share).

Technical Setup:   Breakdown from bearish consolidation after Pro Gap down daily, bearish weekly.

Option Strategy:   Bear Call Credit Spread (BCCS).

Stop Loss: $87.22.

 

VIDEO ON OPEN TRADES AND ADJUSTMENTS

 

 

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Master Trader and You Building Your Financial Future Together

Happy trading!  If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com

 

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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Twitter: @GregCapra
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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.

 

NOTE:  Master Trader and its representatives may have existing positions in actual or other trade recommendations before or after suggested herein.  Additionally, we may manage them differently for internal purposes based on different risk parameters than noted herein.

All trade ideas and content are for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, option or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds.  Investment or trading information provided may not be appropriate for all investors, and is provided without respect to individual financial sophistication, financial situation, investing time horizon or risk tolerance. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request.  Master Trader Consulting, Inc. is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardize Options and the Risk Disclosure for Futures and Options found here:  CLICK HERE.