However, the NASDAQ 100 is getting close to its Major Support (MS) level. A retracement of 80% or more back to MS within an uptrend we would then consider the trend as sideways.

Master trader Tip: While the definition of an uptrend of higher highs and higher lows is intact until the break of MS, deep retracements of 80% or more dictate that common sense puts the uptrend -- in the time frame used -- into question.

If you’d like to learn more about the technical strategies that we use, or just would like to have a refresher from the MTS class, join me this Thursday at 4:15 ET.  We did send out an invitation to register, but if you missed it click here.

The broader markets were in correction mode last week. Some sideways, others lower, but there’s been a decent amount of stocks that have advanced anyway.

There have also been quite a few that have been taken out to the woodshed. If you don’t know it, the woodshed is where stocks are taken to "correct them" - smile.

Something that I’ve learned from experience in the markets is that there are times when what appears to be minor corrections in the broader markets, can be severe in individual stocks.  

The take away from this is that don’t look to the broader markets for a reason not to take a stop-loss when a stock that you are in starts heading lower below your stop-loss point.

Corrections in the broader markets can be relatively benign based on the percentage of their correction. But that doesn’t mean your stock won’t drop significantly during that time.

For example, while the NASDAQ 100 was down last week 2.78% and the Semiconductor ETF symbol SMH, was down about the same, Micron Technology (MU) was down over 14 ½% in over 28% from its June high!

Being a student of the market, investor, trader and educator of others for almost 30 years, I can tell you the #1 reason that most do not make money in the long run:  it’s the lack of or absence of proper money management.

In this letter, we provide swing trading recommendations as well as option trading recommendations.

For those of you that are trading our credit spread recommendations, if you have not reviewed this document and videos, please do so right now.

The broader markets should make a stand to hold their current support levels and move up early in the week.

Whether they can turn last week’s candle into a Red Bar Ignored (RBI) will see by the end of next week.

In an uptrend, and the timeframe being viewed, RBIs are the norm, but not a given to happen.

Considering that we are in the September historical corrective month, we will have to keep that in mind.

That being said, the market internals that we follow are almost at a bullish alignment. Stay tuned, we will update on that during the week.

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.          

Over the years, I’ve learned not to read too much more into the charts than what I see in front of me in multiple time frames (MTF).

Using market internals is a big help in determining probable reversal points. Intermarket analysis is also extremely helpful.

Intermarket analysis views how commodities, currencies, various sectors and interest rates can affect each other and stocks related to them.

Historically, the big country markets around the world tend to move together. Not exactly, but generally.  If the US market is moving higher or lower those markets tend to also - give or take any showing relative strength and weakness to the others.

Emerging markets on the other hand could be doing totally the opposite.

This year, the directions are glaringly opposite.  How long can it last?

I don’t think anybody knows, but it is certainly noticed and a concern.

Keeping the focus right here on the US broader markets trends, internals and its intermarket analysis, there’s nothing wrong and nothing different this time.

However, looking beyond, it’s different - hard not to look and think, What if?

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Above is a daily chart of Post Holdings, Inc. (POST).

Trade: Over $98.64, consider buying stock.

Technical Setup: Breakout from bullish multi-week consolidation into r20-MA daily, bullish weekly and monthly.

Stop Loss: $96.18.

​

Above is a daily chart of Fortive Corporation (FTV).

Trade: Over $85.02, consider buying stock.

Technical Setup: Breakout from bullish consolidation above r20-MA after Breakout to all-time highs daily, bullish weekly and monthly.

Stop Loss: $82.98.

Above is a daily chart of Sonoco Products Company (SON).

Trade: Over $57.25, consider buying stock.

Technical Setup: Inside consolidation day after Breakout from bullish multi-week consolidation to all-time highs daily, bullish weekly and monthly.

Stop Loss: $55.44.

Above is a daily chart of Yandex N.V. (YNDX).

Trade: Under $29.50, consider shorting stock.

Technical Setup: Bearish 1-2-3 consolidation after Breakdown from bearish multi-week consolidation daily and weekly, bearish monthly.

Stop Loss: $32.25.

Above is a daily chart of Norfolk Southern Corporation (NSC).

Trade: Over $177.85, consider shorting Sep (9/21) $172.5/167.5 bull put credit spread (12 DTE) for mid-point but limit of $.50/share (closed at $.57/share). 

Technical Setup:   Breakout from bullish multi-week consolidation into r20-MA daily, bullish weekly and monthly.

Option Strategy:   Bull Put Credit Spread (BPCS).

Stop Loss:   $172.98.

Because your success is vital to you - and us.

Before selling options or credit spreads, we urge you to review the valuable and detailed information that we have provided for you in your Member’s Area.

You will find it by scrolling to the bottom of the page to Mastertrader Subscriber Resources.

The link is Money Management Considerations When Selling Option Credit Spreads for Income.

It explains Master Trader Money Management, Trade Management, understanding the use of Contingent Orders, and much more.

If You’re in a Rush to Start

A quick simplified approach to calculating contract size is to simply base your contract size based on the number of shares permitted in your Trading Plan as if you were trading the stock or ETF.

Simple Share Sizing = $ Risk / Stop Loss

The amount of money that you are willing to risk - divided by - the stop loss amount. For example, $100 / .20 = 500 shares

Credit Spread example, if your Trading Plan allowed you to trade 543 shares of AAPL based on the stop loss, then simply round down to the nearest hundred and short an equivalent number of contracts of the option.

Since 1 contract represents 100 shares of the underlying, this would be five (5) contracts.

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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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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.