Leader and index Look


One of the most important things we do on the weekends is to take a close look at the indices and leader stocks to get a “feel” for the tape for the coming week.

We often start out with MarketSmith Near Pivot Scan and IBD 50.

KL IBD #2 acts great and more importantly, as a gold stock, dances to a different rhythm than our fave momentum tech stocks. As long as that 20sma weekly holds the stock looks good. Gold stocks we prefer to buy on support rather than breakout.

PANW IBD #20 sold off into support — we like to keep a close eye on software stocks as a tell for the tape. It held 220 support, now needs the follow through.

PYPL IBD #7 looking good. Quite a bit away from 20sma weekly and has a high base– we would prefer to get a pullback on this one on 50sma daily near 106.

TWTR IBD #10 holding the gap — in this type of range bound tape we prefer to buy support and sell into resistance. This means we are looking near 35-36 for support trade.

SPLK Near Pivot Scan from MarketSmith bounce off 20sma weekly and setting up. Even if you are not interested in the stock keep on watch-list as as tell for how well breakouts are working, especially in the software leader sector. If tape changes from range bound back to breakout/momentum we want to find out early — and having a stock like SPLK basing near highs will help.

SPY bouncing around in blue zone — range bound tape meaning thus far best strategy has been buy support, sell resistance instead of buy breakouts/short breakdowns. Also quicker exits than usual.

Close under the 50sma on Friday did not give the best look but we’ll see if there is follow thru this week. We prefer weekly look for indices.

QQQ same thing with a close just under 50sma. Again though without follow thru it’s not that relevant.

Weekly has room to 175 for support trades to be valid — in fact we would love a bounce off 175

IWM failed breakout 3 weeks ago and now sitting on support. IWM and Semis somewhat canaries in coal mine so keep an eye on this one. Best case scenario for bulls is that this are holds.

SMH right into support — has to hold this 100-104 area or things could turn quite nasty. Right now it’s a pullback to support but it needs to hold/bounce.

Not the easiest tape right now — quick and small not a bad strategy.  See you on the streams. HCPG

Tape talk

After 21 days of bliss in the sweet spot for trend-traders we got a break 7 sessions ago with volatile headline follow through.

We talked about our ideal scenario on April 20 (with updates) with retreat, gap fill, and then new highs. We have now step 1 (retreat), step 2 (Friday gap fill), and are long for a bounce. Will we see new highs? Not sure but being long $SPY under 283.5 with original 1 point stop (we tweeted it real time on StockTwits) was a great risk/reward that we had been waiting on for a while.

Gap fill 282.5 — wait for buyers to show some interest. Pay up less than 1 point with stop on lows. SPY up 5 points from our entry on this size trade with original 1 point stop. As our custom we take off the active portion into the close leaving full swing on with trailing stop.

So here we are — we have the retreat from resistance, we now have gap fill. Two choices. a) the gap fill bounce is temporary and we will break it and go to next support magnet (red highlight) or b) we go back to highs/new highs. Of course there is also a third choice of making a new range between highs and Friday lows.

If it is choice 2 or 3 then swing ideas should work again. Looking at MarketSmith scans for new ideas we did find some common themes. One, it’s good to have software strong. They are clear market leaders and if they are hanging tough, that is good news for broader tape.

WDAY for example, IBD #50, didn’t even hit the 20sma weekly and already back near highs.

NOW #IBD #6 at highs and didn’t even hit 20sma on daily. Incredible strength.

PAYC IBD #8 also at highs with every dip bought by investors.

Second theme we would like to focus on is the semis. We wrote about the importance of 110 in our newsletter this week and in our posts on Twitter/StockTwits. Note how both days bulls managed to close back on the line. 110 is 50sma and horizontal support so good to keep it alive.

AMD has been on our lists for a while waiting for this weekly breakout. Nice hold on 50sma daily this week. Near 29-30 it could get pretty juicy.

NVDA broken for now but earnings this week could wake this monster. Needs to get to 200 to break thru resistance. Best case scenario: gap and base 190-200 to set it up for a run back to highs.

So now that gap fill held, software is holding, is the bottom is in? Speculating is hard enough, but in headline tapes it becomes even more challenging. We like the idea of gap fill bounce follow through but headline risk is real right now. We like our long entry and will stick by it if price stays above 284 area. One day at a time. See you on streams. HCPG

Stalking the #NearPivot


Our job as traders depend on constantly finding new ideas/set-ups. We are swing traders who often have 3-5 positions on for several weeks. Most of the time it’s like a revolving door with some older positions hitting trailing stops/goals and other new ones being added. One strategy that has helped us to find new ideas is going through MarketSmith’s Near Pivot Scan looking for new ideas BEFORE they breakout. Let’s review a few and look at some fresh ideas:

COUP from Near Pivot scan under 100 that we had featured several times in our newsletter with the big breakout. Note TWLO earnings after the close which will likely have some affect on the software sector.

PANW currently in the Near Pivot scan and IBD # 14 with a gorgeous base. We find this stock can be tough to trade with tight stops but works well in swing with wider play area.

TXN from the “Tight Areas” under the G250 Pattern Recognition scan

UA from the Breaking Out scan leaving daily congestion.

WDAY another example of a Near Pivot candidate that we had stalked (and currently long partial swing).

Stalk them BEFORE they breakout and have plans in place the night before. We like keeping the decisions that we have to make intraday to as few as possible. We do everything we can possibly do in terms of preparation outside of market hours.

See you on the streams. HCPG

Earnings and IBD


Earnings season is a time of adjustments for us: we have fewer swings as we don’t hold into earnings in the trading accounts (but yes in retirement accounts) and we are constantly looking for post earning swing ideas.

We go through MarketSmith earnings-upcoming and first sort thru IBD:

Next we look for solid bases and potential gap and go from those zones. GLW a great example with earnings coming up April 30. IBD #46

Next we hit “View stocks in industry” of our favorite sectors and go through those charts. Semis priced for perfection but small base here in KLAC worth a spot on your watch-list.

$MCHP #50 on IBD near highs — weekly shows a pretty severe cup. Would love a base here but if gap and go with decent risk/reward post earnings we will give it a shot.

Post earning trades can be fantastic but they don’t set up as often as watch-list candidates (with no earnings). NFLX good example — we would have loved a gap and go near 380 but it had no such plans.

But as we always write in our newslettters, alerts are free. Prepare for different scenarios and take them as they trigger. See you on the streams. HCPG

Near Pivot scan ideas


Market acting very well near highs. Massive run on SPY from the December rally to now so any digestion here is healthy and will create new set-ups. The last base gave us set-ups in current positions NVDA BABA BIDU NFLX.

Let’s take a quick look through the MarketSmith Near Pivot Scan, one of our favorite scan to look for new ideas

ADSK nice looking chart under 168. Earnings out May 22, we think it will try to move out of this cup before then.

WDAY from the hot software sector basing under 200. A bit messy at the time for our taste but good enough to add to watch-list in case it calms down and creates a base in the high 190s

GLW blast from the past breaks out at 35

MCHP IBD #50 strong chart, needs semis to set up to really take off.

SMH at major resistance here — too V-ish we believe to breakout right now successfully; needs a handle and some work. Ideally we would like a high base 110-113.

A bit of chop would be welcome right now to build horizontal work on all the above. We want what many traders often want in these times: slight pullback, a bit of chop, and then GO! Breakouts from extended areas have higher failure rates and tend to be more volatile, which in turn often stop one out before making the real move.

So next time market is boring and choppy, don’t complain. Necessary part of the cycle. See you on the streams. HCPG