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Showing posts from 2020

Gold and Airlines: attractive ETFs for next weeks

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Gold is very attractive again.
Due to its fundamentals, Gold is a great option for the next weeks, given that its inverse counterpart, the dollar, may continue to weaken due to two certain factors: the approval, increasingly close, of the US stimulus bill and the lower trend in inflation. Its risk is still there and gold can take advantage of that situation until the end of the year.Technically GLD, the gold ETF, presents a very attractive chart, the kind that every trader wants. In the 4-hour price, the price is located in a powerful key zone: on the one hand, a 2-month purple downtrend line with up to 4 touches. Also, its crucial SMA200 average, in light-blue hit on Thursday. And last but not least, its green Fibonacci retracement of 23.6% of its rise since March. Its black EMA50 confirms a bullish bias. Overcoming this zone will be decisive for next bullish behavior, with resistance at the psychological level 2000 of its future /GC. So, as usual, check price action before a trade de…

Only ETFs of my Q4 Long Portfolio

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On my Thinkorswim trading platform, I manage several watchlists, differentiating them according to the instruments it contains. There are stocks, futures, ETFs, sectors, and indices watchlists. My different ETFs watchlists usually keep the same symbols in time, diversified by sectors, industries, countries, commodities, both at 1X normal speed and 3X triple speed.  My Indicessectors, and futures watchlists are also fixed, covering the main indexes and commodities from Wall Street and major foreign exchanges, usual symbols well-known by all traders.Those that do change, usually monthly, are the symbols of my Stock Watchlist, stocks which I follow on a daily basis, due to my own research, that consider both fundamental and technical analysis, news topics, or simply popularity. Over time, it appears in the list new stocks, disappear others, according to the importance they are acquiring, in my opinion. 





Q4 Watchlist (Oct-Nov-Dec)
After three months (Feb/Mar/Apr) using hardly my "cor…

Nasdaq Ready for the Yearend Reversal

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September ends and he does his usual job in the markets: being a bearish month, in this case correcting the excessive rise of the SP500 and Nasdaq, artificially driven by the Fed and the FAMAGs. And October may be a key month for the immediate future on Wall Street. Seasonally, that month is known to kick off a year-end strong bullish rally, but now we are in an election year and no surprise should be ruled out.

Keep in mind the following fundamental aspects, which will define the bias of the market in this last quarter, prior to making long-term decisions. Smart money, hedge funds, and institutions will do the same this week, prior to the end of the quarter, before proceeding with their usual rebalancing of portfolios. If they do, even more so we, the retailers.

1- The US elections in November, which heat up this week with the first Trump-Biden debate. Wall Street does not trust Biden and his economic program. It now prefers, by far, Trump's victory. And investors are also concern…

FOMC could drive Markets this week

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Highlights that will move the stock markets this week:
- The Fed meets on Wednesday for the final time before the Nov. 3 presidential election with investors hoping to learn more about its decision to tolerate higher inflation. 
The Fed’s decision to tolerate periods of higher inflation effectively means that interest rates will remain lower for longer. Meanwhile, the Bank of England and the Bank of Japan will both hold policy meetings just hours after the Fed on Thursday.

- Markets will also be paying close attention to data on U.S. Retail Sales for August, out on Wednesday, and initial jobless claims figures on Thursday.  The number of new claims for unemployment benefits hovered at elevated levels last week, suggesting the labor market recovery from the COVID-19 pandemic was stalling as government financial aid to businesses and the unemployed dries up.
- Last week’s volatility in stocks could continue with a much-awaited fiscal aid package stalled in the Senate and the election l…

Option Strategies for Earnings Season

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Buy a stock just before its earnings report is a bet: it can be highly profitable or devastating for your portfolio. You decide the risk you face. I always prefer to wait for the report, to compare their numbers with the estimates in EPS, sales, and guidance, review the conference call for some additional data and see the next day analyst's ratings, which usually increases or decreases their weighting and price target. And, of course, you can use specific options strategies during these events. Let's overview some ideas as to choose the right strategy. You need to know the following principles:

-  A strategy that involves long options (been calls or puts) will typically gain value as IV increases and lose value quickly with IV decreases.

- On the contrary, a strategy that involves short options (been calls or puts) will typically gain value quickly with IV decreases and lose value as IV increases.

- During an earnings event, the implied volatility IV of the underlying usually…

Markets remain artificially driven by the Fed

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As I explained in previous posts, as many cautious traders, since coronavirus emerges, I am working with day and swing trades only, without even creating the usual long-term portfolio, due to the bizarre behavior of the stock market in this year 2020, artificially pumped by the Fed, with not only economic but political intentions. The recovery since March was a great opportunity for gains, now is time to protect them. I am expecting a necessary market correction in the next weeks or months, as we have an extremely overvalued market, which is not in line with the real economy and with many index indicators about to explode (for example, the SP500 put-call ratio or its PE ratio above 25, unseen since 2008).





Levels to watch this week in main indices
The key to a successful application of Price Action Trading is to choose the appropriate support and resistance levels and wait patiently for the price to approach or reach one of them to start making entry decisions. Once decided, the targe…

Trendline Strategies using Price Action Analysis

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This post intends to continue what was previously posted here. Knowing the importance of candlesticks, the patterns they form, and their crucial importance when the price reaches trendlines or support-resistance levels, I make here a simplified summary of my trendline strategy for day-trading, using Price Action Analysis. For this, I will rely on the charts from Forex.doc, which are among the best explained and drawn that I have found on the internet. Thanks to their authors for permission to publish some of them here.

Trendline Strategy: Basics
A trendline connects swing highs or swing lows during a trending market, and can act as support or resistance line, but also a break of it can signal a trend change.  In an ideal uptrend, price make higher highs and higher lows. In an ideal downtrend, price make lower highs and lower lows.
The strategy is based on the breakouts and pullbacks made by the underlying's price:
 - A breakout is a potential trading opportunity that occurs when …

Fundamentals: useless in this distorted 2020

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Given the indecipherable fluctuations of the economy during this year, the title of this post reflects one of my feelings about this unusual 2020 stock market. A Q1 quarter where the SP500 falls 20% and the next Q2 turns around and rises the same 20% is surely something we will not experience again in our lives. Thus, it's complicated to make a serious analysisas usual, that is to say, reviewing both fundamentals and technicals details, alike.
Powell and the Fed with its zero interest rate (good decision) and unlimited QE (excessive) are artificially propping up the financial markets, literally destroying the risk in markets, instead of investing for growth, just for trying to hide the US (and global) recession, already foreseen since January and accentuated by the coronavirus. Now we have market indicators at dangerous edges, like the SKEW index (that measures the risk of a black swan, a 20%+ plunge of markets) spiking now above its March levels. Or the Nasdaq Put/Call ratio (40…

My Stock Watchlist for June-July 2020

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On my Thinkorswim trading platform, I manage several watchlists, differentiating them according to the instruments it contains. There are stocks, futures, ETFs, sectors, and indices watchlists. My different ETFs watchlists usually keep the same symbols in time, diversified by sectors, industries, countries, commodities, both at 1X normal speed and 3X triple speed.  My Indices, sectors, and futures watchlists are also fixed, covering the main indexes and commodities from Wall Street and major foreign exchanges, usual symbols well-known by all traders.

Those that do change, usually monthly, are the symbols of my Stock Watchlist, stocks which I follow on a daily basis, due to my own research, that consider both fundamental and technical analysis, news topics, or simply popularity. Over time, it appears in the list new stocks, disappear others, according to the importance they are acquiring, in my opinion.






June-July Watchlist
After three months using hardly my "coronavirus strategy…

Best Candlestick Patterns for Price Action Analysis

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As mentioned in a recent post, the key for a better Price Action Analysis with candlesticks is "read" them at a glance and the patterns it forms, mainly when price approaches an S-R level, doing always in conjunction with volume. Candlesticks are a reflection of what buyers and sellers are doing. You need to know its meaning: indecision, rejection, reversal, or momentum.  In Price Action Analysis, less is more with technical indicators: a few of them are enough. The same idea for candlestick patterns. You can find dozens of candlestick chart patterns, but I feel comfortable with a few of them, the most accurate in my point of view.  No need to memorize them all (and its curious names), just understand the mechanics behind this tool. Consider the following:

Single candlesticks
1- Pin Bar (or long-wick candle): the longer the wick, the better the candle. This candle means that indecision began, as buyers tried to push price higher but failed, causing the wick to show, meaning …

Price Action Analysis for Day Trading

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In these days of coronavirus threat and extreme volatility in markets, it's risky for a conservative trader to enter with long positions, even in the short-term. With the SP500 now in a rebound (only due to portfolio rebalancings of investment funds and smart-money short-covering, not fresh money), the key is to see how the SPX will behave when it approaches the 50% of its Fibonacci retracement if it does. Historically in all crashes the Dow Jones (or SP500) have two minimums, the second even lower than the first. And with a world recession in the background, it is more than likely that this will happen in the next weeks.

Therefore, since the end of February, I closed my entire long portfolio and have no long positions when the daily session closes. In March the same: zero longs. I mean, I only do day trades on Index ETFs as SPY, QQQ and IWM. That's my "coronavirus strategy" in days of VIX above 50: preserve cash and do only day trades, closing the trade before the s…

Get Signals from VWAP and Awesome Oscillator

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VWAP, the best trend indicator for day trading:
The volume-weighted average price is a powerful trend indicator for day trading, and it's crucial due to its heavy use by investment funds and smart-money. It looks like a moving average in your 1-minute chart (orange, in mine), and is the same weighted-average we learn in school, in this case, used with the two main factors involved in trading: price and volume.

Institutions work the investor's accounts always buying below the VWAP and selling above it. This way their actions push the price back toward the average, instead of away from it. That's great information for retail investors and traders!

I trade the VWAP in two different ways, depending on the type of trade: breakouts, and pullbacks.

- For breakouts, look first when the price is below the VWAP and, due to price action, crosses it with a big momentum candle.  If this candle also breaks any of your resistance lines (or a trendline), that reinforces the strategy. Then…

Trading the Volatility. Part 2

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The VIX and its inverse relationship with the markets:
The VIX, as a contrarian indicator, is an incredible weapon for technical traders to determine extreme conditions of bullish or bearishness of the market, using its inverse relationship: when the market is rallying, the VIX tends to drop; when the market is tanking the VIX tends to rise. Smart and serious investors use it to bet against the crowd when its greed (or fear) levels are high. And mainly, they use it as protection or hedge for their investments.

The VIX, also known as the 'fear gauge', measures the frequency and intensity of changes in the SP500 in the short-term (30 days), through the implied volatility IV of its at-the-money call and put options. A level below 20 generally indicates a bearish or complacent market, while reads above 30 are generally associated with a large amount of volatility, and mean that investor fears are taking place.

Smart traders usually "buy bargains" when volatility is hi…