Power Setups

I like this one as a breakout stock a lot.  I would have liked it even more had I bought the gap test

QCOM:

COTV:

LFL:

TDOC

Market Overview

And we push higher.  Volume falls off. With earnings upon us trading felt very lackadaisical.  

lottery tickets, OPTT, KOPN, and others were in focus. 

The Big winner on the week is QCOM:  Big powerful breakout in to Stage 2.  -- Keep a watch on the semis.

Forecast:  Choppy market conditions to be expected, don't get lackadaisical with protecting positions.

Recent IPOS.

I love trading in recent IPOs.  Many times these can be very profitable trades for bulls over a couple of months for a couple of reasons.

First,  the floats tend to be small at this stage due to various lockouts, etc. it does not take much to get these moving.

Second, there numerous mutual funds, ETFs, etc... that must buy the new IPO on the open market,  That provides price support.

Third, the quiet period allows news, and analyst targets to stack up and provide a boost when the quiet period ends.

Others' warnings: Without exception, I have never bought an IPO the most were not saying was "overvalued"  Ignore that nonsense,  I want power, I want momentum, I want huge gains.  Overbought gets overboughter on these types of stocks.  Follow price and ignore the rest.

With that being said, let's take a look at the big 3 IPOs that recently began trading.

TWLO: My Favorite and I still continue to hold the position I've acquired in the low 30s.

Trend line is in place,  any bounces off that trend line can, and should be bought.

ACIA:  So much power,  I had a great entry but sold for a $7 gain after on the shadow bar.

LN: This just started trade.  Predictably, it "enjoyed" a second day pull back.  But so did TWLO and ACIA,  in both of those stocks bears were pronouncing them as failures.  

Yet, as with TWLO and ACIA, there were some productive things going on in the shorter term charts.    Notice how LN just went range bound on the hourly.   That tells us the downward momentum is wanning-- i.e. the first day chasers have now exited.    This gives us a lower risk entry. We can risk a small amount-- using hourly lows as our stops and if the trade works, we make 10X R returns.  Yes please!

Also,  many momentum traders will wait until  an IPO  retakes its first day close to enter.  That is a classic setup that many are watching and waiting for.  I  would rather get in before that point, with well defined risk and let those traders push this higher.

So, we'll see how this pans out.

Market overview.

Earning season is now upon us.  Major reporters this week include a number of banks, GS, BAC,  some tech, MSFT, YHOO, GPRO

Indexes:

S&P breaks out.  Below was the chart I had posted right after Brexit was announced.  Where others were forecasting gloom and doom, I saw a range bound market.   Support was found and the level I felt would act at the first support and that held market bounced taking it to new highs.  As impressive as this move has been, I feel the breakout will be tested. 

I'm concerned that the breadth ratios that I follow are pretty overbought, which will limit the upside.  Just as they were at extreme levels after brexit, which I felt would mitigate the selling to the downside.  Quite a quick flip,  now consolidation, and a successful retest of breakout point is necessary before this market can get going to the upside.

Outlook: Choppy trading, minor pull back expected.  This pull back will be a huge buying opportunity.  Look for sslingshot sets

Nasdaq, impressive bounce back from Brexit, but note OBV has declining, divergence.  Nasdaq has not hit its highs yet.  With current breadth readings, I think it will be difficult for it to breakout without more consolidation and some working off of some of the breadth ratios.   

Outlook: Choppy trading

Russell: The Russell has underperformed the other indexes and the  S&P  by a large margin. But there are some positive things going on under neath the surface here.  Downtrend line has clearly been broken,  out of the major indexes its OBV looks the best.

That said, I am concerned that we have a weekly gap last week and the 121 level is where the IWM broke down last year,   That is often a significant resistance point.   Like the other indexes, I feel the breakout point -116 level will be re-tested

Breadth Measures:% of stocks above 40 MA,  78%,  = Danger zone.
Weekly stocks -- overbought
Vix:  at support lows.  -- 
$NYMO: overbought

In sum,  I believe this will present a challenging market for the bulls and bears alike.  My personal trading plan is to trade light this week,  I hope to continue to hold my longer term bullish trades as the market appears to be setting up to make a trending breakout move this year, but my stops will be key.

My favorite Daytrading Signal -- the 5 by 6

When I enter a short term trade, the 5 by 6 signal.  Using the 5 min chart with a 6 ema as guidance by the cross over for a trend change.  My XBIT trade this morning used the signal and worked to perfection.

IPOs- hot and cold.

iDvide IPOs into two separate categories, hot and cold IPOs. IPOs are divided based on first day flipping activity, an asset that is constantly flipped is considered hot. The authors found that cold IPOs continue to underperform and hot IPOs continue to do well in the following year. The possible explanation for this relies in underwriter’s willingness to let original shareholders win at the expense of new investors. This causes the market to correct itself in the first few days following the release of new information.