End of summer ideas

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To put it at the most basic level we use MarketSmith scans  to effectively shorten the time it takes us to find candidates for trading.   We usually do this via two strategies.  One is to scan for specific criteria — such as our China scan last week that netted some great winners such as current position in ZTO TCEHY.

ZTO entry post this scan last Thursday was a riding momentum back from support reversal — meat and potato HCPG type trade — long 18.9 zone.  We have 1/4 left from swing .

 

TCEHY  long under 42 on that bounce on weekly 40 level last week — also have 1/4 left from swing.

BILI we didn’t go long but some of our subscribers did from the scan last week, up currently 16% from our post.

The second way we use MarketSmith scans is to narrow down patterns — instead of blanket scans according to our own criteria, we use their criteria — mostly “Near Pivot” which we’ve discussed before, and for the following “Tight Areas”:

VRTX into interesting zone right now and if it can get over 180 will attract even more momentum trader eyes.

MA we got long yesterday on this tight area looking for lift-off but so far it’s still in basing mode.  Very close to our stop and quite possible it hits it today, and then do we delete? No, not unless it breaks down.    It’s not uncommon for us to get it right on second try.  Don’t worry about being right, wrong, getting revenge.   There’s no room for ego in this job. 

 

ROKU good example.   We had a decent swing trade in it before exiting on trailing stop (remember the gap up post earnings 52 idea from two weeks ago).  It set up again, we tried it last week but got scratched out on Friday.  We put it back in our newsletter on the weekend and last night with specific 58 breakout alert.   Today it offered a great quick 2 point trade and if it can close near 59 we would swing a partial.  Max stop 58 break.

Quick takes: be versatile, especially in the summer.   And if it stops you out the first time but stock does not breach the pattern, don’t delete it and keep it on watch-list.   We’ve been trading for over 20 years and writing this newsletter for over 12 years.  We’ve had countless interactions with traders — and the most noticeable pattern of all is that if you can’t check your emotions in this job you will not make it.

Everything else is infinitely easier.  Risk management?  Trade Ideas?  Easy, easy.

Patience to wait for right time to strike? Emotionally grounded enough not to engage in irrational behavior?  Oh so Much  Harder.

See you on the streams. HCPG

 

 

 

Summer Trading

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We usually are less active in the summer as

a) for our type of trading there usually are fewer set-ups

b) when there are set-ups the momentum for a breakout is lacking.

The exception to this is trading immediately post earnings.  We’ve had 3 good post earnings swing trades this summer: NFLX on reversal on 20sma weekly support, AMD on 17 breakout, and TSLA on 332 breakout (all positions closed).  ROKU TWLO ZTO  three more examples from this week that we stalked for days before breakouts.  We sometimes buy the breakouts on the next day (often they don’t set-up, but when they do it can be excellent risk/reward) but usually focus on  for mini bases on the following days.  These trades often last from few days to a few weeks and all worked thanks to the earnings push.    All together in one earnings season we probably focus on only 10-15 stocks out of ALL the stocks in our universe — suffice it to say they have to fit pretty strict criteria.

Summer schedule:

Using MarketSmith we scan for upcoming, look for set-ups for day after earnings.  This is the stage we have been focusing on these last two months.

Note Tabs Earnings- Reported, Earnings Upcoming.

Next stage, mostly likely in September, a) will go through Reported and look for bases on the winners, or for those of you who like no gap fills, you can scan specifically for them (not our thing but a lot of traders like that).     b) go back to Near Pivot and look for set-ups that are about to trigger.

Rinse, repeat, back and forth.   During earnings season — focus on earnings.   All other times– look for bases in the Near Pivot section.

 

Remember kids, in the end trading is just a job.  Lots of homework and preparation, lots of humility, and lots of grind.  See you on the streams. HCPG

 

 

 

 

 

Market Scan

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At least once a week we like to go through MarketSmith industry to get a feeling of market health in leading industries.  This is what we do:

First up — Retail Internet (for the MarketSmith crowd G3559):    Up 39.6% YTD with the clear leader AMZN but also BABA and recent trader favorite SFIX.   We like to then go through the charts of all the components– in this case 32 stocks.  Within 15 min we get a feel for one of the leading sectors of the market.

 

Two other examples: Computer Software Enterprise which is G3583 including some IBD type favorites BZUN NOW CRM PAYC WDAY SHOP NTNX PVTL :  up 26% YTD.    This sector includes 60 stocks– again we go through them individually to get a feel where this sector is going.

 

 

Another sector we like to check out is Computer Software Security– G3220 with 31 stocks.   Some recognizable names in sector that our readers will know  PANW CHKP FEYE

 

Two other sector standouts that we will go through this weekend  Medical Products and Consumer Services Education up 30% YTD.

We don’t do this every day but do like to go through at least once a week — nothing will give you a better feel for the tape than going through the charts of the leaders.

As for the market — QQQ held the 50sma today, and followed through again today while waiting for AAPL earnings. So far, good action.

BIDU on 50sma weekly — last support we like to pay attention to for healthy trend.   Earnings out after the close — if the tape likes it tomorrow we’ll be paying attention to get long on a good risk-reward set-up.

See you on the streams. HCPG

 

Post earning trades

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In our trading accounts we don’t usually hold through earnings  (in contrast to our less-mentioned longer term accounts that are cost-averaging into ETFs and some go-to stocks such as AAPL GOOGL).

Some of the best moves can come immediately post earnings — they often are harder to catch but when you do they can be golden.

$NFLX is a great example this week with an open and rally from the 20sma weekly:

Fantastic hold on the 20sma weekly (345) but the short term 60min/9EMA (370s) has been the wall for now.

Two ways we trade around Earnings.  1)  Using MarketSmith scan we look for Earnings-Upcoming and strategize around potential trades at support/resistance levels.  This is a more difficult strategy — basically looking to act on the open post earnings.  Often lots of volatility and on average out of every 5 ideas probably only 1 triggers.

 

 

2) More preferable:  we look through the Earnings Reported section and look for potential patterns setting up a few days/week out post earnings.  We love trading stocks around a week out post-earnings knowing the numbers are already out, traders have taken positions, and patterns are setting up.

Hit Earnings-Reported on MarketSmith and sort by ESP last Reported

 

And of course every weekend we go through the IBD50 list to get a feel for growth and momentum in the tape.

 

There are some parts of trading that will get easier with time — honing in on risk management, entry/exit strategies, etc but the grind to find new candidates and new set-ups never ceases.  We like to take Saturdays off and look forward to looking through charts with fresh eyes on Sunday morning.   For us having at least one day off without any charts has been a good idea to a) not get burnt out b) get some distancing effect for objectivity.

See you on the streams! HCPG

Sector Spotlight

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“Computer Sftwr-Enterprse” : that’s the industry we are looking through in the MarketSmith scan.

Or we often reverse the process: after finding a stock we’re interested in we hit the “View Stocks in Industry” button and scroll through all the competitors.   As traders know some of the best trades you can get are sector trades.

For example we have been stalking WDAY which broke out yesterday —  once we enter the stock in MarketSmith screen we can see all the other stocks in the industry:

 

WDAY with the breakout of trend-line yesterday and follow through today:

BZUN held on the 50sma and now playing catch-up:

NTNX held weekly support but finding some resistance on daily here on the 20/50smas –  add to watch-list for next week.

ULTI has been on an amazing run — this is weekly chart:

Waiting for some type of secondary base before getting on this ride as it has run up from weekly 20sma with a V type move:

Also not a bad idea to go through the list and look for catch-up plays from lesser known companies — one thing we’ll do this weekend.

After a few short dips market is back at it flirting with highs — individual type moves though have been choppier than usual, very common in summer months.  We’re trading smaller and more defensive since we got back from vacation and waiting to see more consistent follow through — WDAY good action on that front.

See you on the streams.