In last Monday’s commentary I said, “Historically, these types of patterns resolve themselves by moving higher. And while there were improvements last week to suggest that it may happen this week, that move may not be as broad based as the one that started the move.
What looks like it will lead to a move higher, assuming that does happen, is what has outperformed in the past: that the being Technology and Internet sectors.
It’s awesome when a plan comes together, but it was not an easy week in the beginning. We came into the week long several ETF’s, stocks and bull put credit spreads in anticipation of a move higher.
While there is always risk over a weekend, the charts were bullish and we believed that the unknown time risk was worth being long over the holiday weekend.
So Tuesday’s gap lower wasn’t what the charts suggested the prior Friday. And the selling continued most of the day until the last half-hour on Tuesday.
However, that half-hour rally did not negate the bearishness of the day, but we held because the big- and intermediate-term picture was still bullish, so the gyrations caused by Italy’s political drama I believed would be overcome.
If you missed it, I wrote about this that night and you can read it here
Wednesday’s gap higher and move back to resistance was a huge improvement (relief) and confirmation that buyers were still in control.
Going into Thursday, it seemed like our longs were locked in to produce the Benjamin’s, but Mr. Schizophrenic had other plans.
Thursday turned out to be yet another down day erasing some or most of Wednesday’s gains depending on what market you were looking at.
I cannot tell you that my confidence wasn’t being shaken at that point, but my years of experience said to hold on. And Friday was the payday!
Where were the big gains? Primarily where I said they would be in last Monday’s letter: Technology and Internet. We are still long in anticipation of further gains.
Biotechnology stocks came on strong, especially on Friday. We bought the Biotech ETF symbol IBB Friday morning in the Green Room in anticipation of a further move higher.
Dow Jones Industrial Average
Above is the chart of the Dow Jones Industrial Average that we review each week.
While we had excellent gains in our positions on Friday, the part of my commentary last Monday where I said,
“And while there were improvements last week to suggest that may happen this week, that move may not be as broad-based as the one that started the move.”
That statement was spot-on based on the above chart. The Dow and most sectors –other than the ones suggested that would perform lagged.
While the Dow did hold the support area provided in last Monday’s letter on the move lower Tuesday, it was never able to turn positive on the week.
Assuming these markets can move higher — as Friday’s close suggest that they can, I told the Greenies in the chat room that it’s possible that some of the lagging Dow 30 will play catch up this week. We shall see.
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.
What If It Cannot?
A move below last week’s low (which is just above 24,200) I think would almost guarantee a test of at least 24,000 and possibly lower.
While that doesn’t seem likely based on the strength of the S&P 500, Technology, Internet and even the Transports by the end of the week, we always have more than one scenario.
Based on our view of the broader markets moving higher, which I will cover in more detail in the video below, the lagging Dow ETF symbol DIA is not of interest at this time.
However, it would be a surprise to see other markets move up without the Dow at least bringing up the rear to some extent.
Apple Inc. (AAPL) started to move higher on Friday which helped our long in the Technology ETF in a big way move up as well. Our bull put credit spread in Apple looks like a sure thing — as far as anything is a sure thing in the markets (smile) — for a 100% gain.
The two drugs stocks in the Dow look like they can move higher, so some of the “Dogs of the Dow” may do some barking.
Market Overview Video
[s3mv fileName=’June+2018+Letters/MarketOverview_6_04_18.mp4′ fileType=’video’ source=’s3′ width=’800′ height=’450′ splashImage=” preLoad=’Y’ autoPlay=’N’ belowVideoHTML=” cuePoint=” redirectURL=” pauseAtCuePoint=’N’ isSecure=’Y’ bucketname=”]
NEW STOCK TRADING IDEAS
Below is a daily chart of Zendesk, Inc. (ZEN).
Trade: Over $57.24, consider buying stock.
Technical Setup: Bullish consolidation following a bullish run to all-time highs after Pro Gap daily, bullish weekly.
Stop Loss: $53.83 to start.
Below is a daily chart of SPDR S&P Pharmaceuticals ETF (XPH).
Trade: Over $42.77, consider buying stock.
Technical Setup: Breakout after bullish consolidation at resistance following 100% retracement daily and negating bearish inside day, bullish weekly.
Stop Loss: $41.98.
Below is a daily chart of LogMeIn, Inc. (LOGM).
Trade: Under $107.55, consider shorting the stock.
Technical Setup: Bearish -123 Continuation below d20/50-MA daily, bearish weekly, relative weakness to markets.
Stop Loss: $110.92.
Below is a daily chart of C.H. Robinson Worldwide, Inc. (CHRW).
Trade: Under $86.94, consider shorting the stock.
Technical Setup: Bearish -123 Continuation after a rally and double top from Pro Gap below d50-MA daily, bearish Master Trader Sell Setup and Topping Tails at d20-MA weekly, relative weakness to markets.
Stop Loss: $89.16.
NEW OPTION TRADING IDEAS
Below is a daily chart of GrubHub Inc. (GRUB).
Trade: Over $111.46, consider buying stock and selling Jun (6/15) $115 calls at mid-point.
Technical Setup: Breakout after bullish multi-week consolidation and Breakdown Failure in May on daily, bullish weekly and monthly.
Option Strategy: Covered Call (CC).
Stop Loss: $101.51 to start.
Video Trade Review of Open Bull Put Credit Spread on GE:
Thank you for being a loyal subscriber and feel to email us with any questions or comments on anything.
Access Trading Credit Spreads Course here, it’s the best $97 dollars spent to get up to speed fast.
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
Follow Greg on Twitter, YouTube, and StockTwits to get real-time updates and education:
Twitter: @GregCapra
Stocktwits: Greg_Capra
youtube.com/c/mastertrader (please subscribe to receive all the timely stock market updates)
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.
