Last week, wasn’t a huge bullish move higher, but it did a lot to improve the technical outlook in many charts that were lagging.
The sectors that we had anticipated to lead a move higher in the letter a couple weeks ago continue to move up, but the momentum certainly slowed down.
And what we anticipated to play catch up in last week’s letter did exactly that.
The Russell 2000, which is been leading this move up made another new all-time high and the NASDAQ composite and the NASDAQ 100 did as well.
Also tweaking out a new all-time high was the Aerospace and Defense sector ETF. While Boeing (BA) was not the best performer in that sector, it’s always the one that is most widely watched and typically does well—it did.
The best performer percentage-wise on the week was National Presto (NPK). While a bit extended at this point, the trend is higher.
The best performer on Friday was Astronics Corp (ATRO) up 5.48%. This one is far from a new all-time high, but it looks like a relatively solid bottom has been put in place on the daily and weekly time frames.
If your patient holding stocks coming out of bottoming patterns (they typically take time to move higher) consider ATRO long with a stop below last week’s low.
The Homebuilding and Home Construction sector ETF’s were top performers last week and they look like they have a bottoming place.
I’ve been looking for these two establish a low for the last couple of weeks in the letter and we will consider buying these on a pullback.
The best performing sector ETF was the Retail sector ETF up just over 6%. While we had a nice again in this ETF when stopped on a trail-stop on the big down day 5-31, missing that move was unfortunate.
The Transportation Index (IYT) ended the week with another weekly Bottoming Tail (BT), which is the third one in a row. So it looks ready to participate in the broader markets recent move up if it can trade above the recent highs.
Dow Jones Industrial Average
Above is the chart of the Dow Jones Industrial Average that we review each week.
In last week’s letter, I said, “If the Dow can get above last week’s high (it needs to), the prior high just above 25,000 is its next reference point to overcome.” It did that and moved beyond the 25,000 Mark to just over 25,300.
It is now facing its first retest of Major Resistance (MR) just above 25,400. If they can get through that, and it looks like it should, the next reference point of Major Resistance is at 25,800.
I would be very surprised if it could do that without a retracement along the way.
Based on our systematic analysis of support, our first reference point of such is Friday’s low. Considering the small gap down on Friday and very positive close near the higher the day, prices should not trade under that low early in the week.
From a bullish point of view, the Dow should trade above Friday’s high and push to an above that first Major Resistance area.
The trend is up with resistance areas above to overcome. Those initial resistance areas are well below the all-time high in the 26,600 area.
At this point, as long as prices stay above the new major support area marked just above 24,200, the trend is up. That being said, pullbacks should hold in the 25,500 area. That would be the ideal for the bullish scenario.
The market internals that we use as a guide to bullish and bearish extremes have edged into the bullish extreme area. That does not mean that this move higher is over. However, should prices accelerate higher this week; I suspect we would get an extreme that would signal the high probability of a short-term correction.
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Market Overview Video
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NEW STOCK TRADING IDEAS
Below is a daily chart of Huntington Bancshares Incorporated (HBAN).
Trade: Over $15.73, consider buying stock.
Technical Setup: Bullish engulfing daily after bullish Breakout daily and weekly, Master Trader Buy Setup monthly.
Stop Loss: $15.44.
Below is a daily chart of Builders FirstSource, Inc. (BLDR).
Trade: Provided it opens over $20.10, buy 5-Min. high of stock.
Technical Setup: +WRB Breakout daily and weekly, Master Trader Buy Setup monthly.
Stop Loss: $19.71.
NEW OPTION TRADING IDEAS
Below is a daily chart of iShares Transportation Average ETF (IYT).
Trade: Over $197.61, consider selling Jul (7/20) $190/180 bull put credit spread (40 DTE) at mid-point but a limit of $1.05/share (closed at $1.12/share).
Technical Setup: Breakout daily and weekly with price void above, with multiple bullish Bottoming Tails (BT) on the weekly chart.
Option Strategy: Bull Put Credit Spread (BPCS).
Stop: $190.75.
Below is a daily chart of Verizon Communications Inc. (VZ).
Trade: Provided it opens over $49, over 5-Min. high consider shorting Jul (7/20) $47 naked puts (40 DTE) for a limit of $.43/share (closed at $.45/share).
Technical Setup: Breakout from Major Support daily.
Option Strategy: Short Puts (SP).
Stop Loss: $47.51.
Below is a weekly chart of PulteGroup, Inc. (PHM).
Trade: Provided it opens over $32.25, over 5-Min. high consider shorting Jul (7/20) $30 naked puts (40 DTE) for a limit of $.30/share (closed at $.33/share).
Technical Setup: +WRB Breakout from multi-month consolidation daily and weekly.
Option Strategy: Short Puts (SP).
Stop Loss: $30.06.
Below is a daily chart of Moody’s Corporation (MCO).
Trade: Over $179.29, consider buying Jun (6/15) $175/180 bull call debit spread (5 DTE) for mid-point which will have at least $.67/share positive time decay (closed at $3.54/share) for a swing trade.
Technical Setup: Continuation Breakout daily, bullish weekly to all-time highs.
Option Strategy: Bull Call Debit Spread (BCDS). Based on closing prices, has potential ROC of 41% ($1.46/share Max Gain divided by $3.54 Debit) if expires over $180/share.
Stop Loss: $176.38.
Below is a daily chart of United Parcel Service, Inc. (UPS).
Trade: Over $117.34, consider shorting Jul (7/20) $115/105 bull put credit spread (40 DTE) for mid-point (closed at $1.45/share).
Technical Setup: Possible bullish Head and Shoulders Breakout with strong transports, bullish weekly.
Option Strategy: Bull Put Credit Spread (BPCS).
Stop Loss: $115.58.
Below is a weekly chart of Century Communities, Inc. (CCS).
Trade: Provided it opens over $31, over 5-Min. high consider selling Jul (7/20) $30/25 bull put credit spread (40 DTE) for closing mid-point of $.55/share.
Technical Setup: Breakout daily and +WRB Engulfing on Major Support on the weekly chart.
Option Strategy: Bull Put Credit Spread (BPCS).
Stop: $29.84.
OPEN TRADE UPDATE VIDEO
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Trading the Pristine Method — Origin and End
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