MARKET SUMMARY (9/9/19) – CRUISE CONTROL

Time to sit back and chill.

The market is fairly simple right now. And most of you know I’m all about keeping things simple.

On the weekly charts, the market has done everything it needed to do to confirm a bullish bias. Not only did we break above the recent downtrend since the July high, we launched right back into the previously broken uptrend (the blue line above). MACD and DMI are both confirming.

In theory, the market should have a few weeks of upside from here.

That said, I (and hopefully many of you) got in early on this trade. In fact, my first shot at a long on August 5 ended up being the bottom to the exact day. I’ve held that long ever since then, adding selectively, so I’m solidly profitable. That’s the advantage of occasionally trying to be anticipatory.

Part of what triggered that buy was the overwhelming negative sentiment at the time. Sentiment is a hard thing to gauge, but when almost every headline and tweet is screaming about recession, you have good risk-reward if you suck it up and take the other side.

Today, we’re obviously in a different boat. 

With many others looking at the same charts I am, sentiment is much more balanced. If anything, its probably a little too bullish for my liking.

Personally, I’m more inclined to be looking for spots to take some profits. There really aren’t any bearish signs on the charts yet, and as I said, the odds still say we should expect 4-6 weeks of strength at least. But we are overbought on daily charts so I’ll be looking at shorter time frame charts for possible divergences and weakness.

This is a luxury of buying when everyone else was freaking out – I can take profits here and step aside until the next fat pitch. There’s still part of me that hoped for a lower low, and with the increasingly bullish sentiment, we still might get it. If we do, it’ll be yet another dip to buy. We’ll keep it simple and let a breakdown of the charts tell us (starting with a break of that blue uptrend line above possibly).

Longer-term holders, feel free to just let it ride.

Keep an eye on my Twitter for any short-term sells I might make: @marketmind3


4 THINGS ON MY MIND

1. A trading bias can make or break your short-term trading. No matter what anyone says, even those that claim to only follow the charts, everyone has some bias. At the end of the day, there are millions of chart interpretations, and you can usually notice a bias in which charts people focus on as the most important ones.

Luckily for us, my bias has been simply that the Defcember low was a signficant one and that we are in a bull market until proven otherwsie. That bias has served us well, as we’ve been able to confidently buy big dips without fear of the big crash everyone stubbornly keeps looking for.

2. Individual stocks are as much a part of my trading portfolio as my market bets. While I really only post my market bets on Twitter and keep score of those for my published track record (up +58% since I started posting on 3/8/19), I focus equally on individual stocks in my personal portfolio.

Many of the names I highlight in the “Chart That Caught My Eye” section of my e-mails are stocks that I end up trading. Looking back at the last 7, there were 5 longs (USO, QCOM, CGNX, EA, ATVI) and 2 shorts (CSCO, WDAY). If you made the trades in these 7 stocks since the day they were mentioned, you’d be up on average +11.8% in those names. Most importantly, you’d have no losers – every trade, both long and shorts are profitable. Not bad… 

3. Bitcoin has been going sideways for months now. Technically we’re still below the resistance of the broken uptrend line (blue line). But I’m starting to see too many traders expecting a move downward (like I have for the past few weeks). The longer it lingers in this range, the increased chance we might actually breakout higher. 

I’ll let the market tell us what to do.

4. Cannabis stocks might finally make a move higher. As you know, I’ve been watching these for months now. I’m a long-term bull on the cannabis industry in general, even though I’m not sure any of the leaders today will be long-term winners. Either way, I’m looking to trade these names. We finally got a strong weekly move, with a MACD cross on some of these. I own a basket of ACB, CGC, TLRY.


A CHART THAT CAUGHT MY EYE

JD – JD.com

Nothing like scooping up some Chinese stocks in the middle of a trade war and political unrest.

The chart set-up is fairly straightforward. I like how the stock was hammered down -62% from its highs, but has since staged a steady, grinding recovery. 

It has tested support, and now starting to break above resistance.

Technicals are lining up on multiple indicators.

Strategy: Buy here, with a near-term stop out in the $29.50 area, which would be a simultaneous break of the converging downtrend and uptrend lines.

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