#MarketTiming swing bottoms with 40 plus sells on the #Nifty50StockList

Again and again, my nifty-50 stock list moves from oversold to overbought and back again to oversold like an ever spinning wheel within the market’s spinning wheel…

And each time there are 40 or more of the 50 stocks on sells, it’s time to sit up and take notice since that is the number that most often signals either the bottom or the beginning of a bottom on each down swing.

I first posted about this strategy in November of 2015, one of the first entries on this blog.

Nothing has changed.

Usually it just takes one day of 40 sells, sometimes two days, to set up the bottom of a swing. Should be noted if it goes more than two days that’s is a warning that something bigger may be in the offing (last time that happened was the start of the Covid-19 bear plunge this year).

This is just an FYI, but it is what market timing and swing trading are all about.

The results can be quite remarkable, in leveraged ETFs like TQQQ, TNA, leveraged sector ETFs like SOXL, FNGU, and, of course, hot individual stocks.

The buy signal is the open of the first day after the Nifty50StockList ceases to have 40 or more stocks on sells. Stops are at whatever price level on whatever is bought based on each trader’s risk tolerance.

On the chart below the 40-plus sells are marked with purple paint bars.

(click on the chart for a larger view)

In the $BLNK of the an eye, 40% and 12.6%

On my last swing buy signal $BLNK, a company in the business of providing charging stations for electric vehicles. You know, things like those posts in parking garages and any where else something like a Tesla might pull in for a recharge.

I’m not one to get into fundamentals but it seems to me BLNK is a baby with a whole world and all of its life ahead of it.

If one is so inclined to peruse the fundamentals there is this at BARCHART.COM.

Anyway…

Since my last swing buy on stocks, ten trading days ago, BLNK is up 40% (see the chart at the bottom of this post below). Since I tweeted this on its run out a Darvas Box it is up 12.6% from the open three days ago.

As some market guru might say — “Sprightly.”


AT THE CLOSE TODAY (9/22):

(click on the chart for a larger view)

#OptionsStrategy – #DayTrading $TSLA strangles

“No one can day trade stock options!” an irate administrator of a Facebook options trading group told me back at the beginning of the year.

His group was centered on “investment income using options.” He was basically doing covered calls or puts, rolling them forward when necessary, in an effort of adding ten or so percent to ownership of the stocks themselves. Fine.

I just happened to blunder into the group day trading SPY calls and puts for ten times that return. I don’t know if it was the returns or, as he said, his belief the practice was so risky I should not be suggesting it anyone.

I argued there were ways to control risk and he might want to open his mind.

He didn’t want to evidently since he blocked from the room.

Well, at the time I got tossed, I thought maybe he might right – after all, trading SPY options was not the same as stock options. As the most popular ETF its option were extremely liquid, with tight spreads, and three expiry days per week. I’ve chronicled much of the SPY trading in posts below so I won’t get into it anymore in this one.

Stock options didn’t have those qualities but some came close – AAPL and FB particularly, others like NFLX, NVDA. The trouble with each of the stock-option trades, however, was that not only did one have to get the direction right for the day (it is a call or a put?) but one also had to have enough movement to make it worthwhile, and then each trade needed to be monitored pretty much constantly all day.

What I was after was a strategy that could be put on early and ignored to the end of the day unless it hit a stop loss during the day, at which time there might have to be a reentry if there was still time to reap some reward.

The trouble with even the best stocks like AAPL, FB, etc. was there was usually not enough bang for the buck in a single day.

Then along came TSLA.

It didn’t take to discover TSLA weekly options were as good as it gets for day trading short strangles, lots of premium, a big range of movement and enough liquidity to fairly easy to put on the trade and, most importantly, to get out of the trade.

In a short strangle, one is playing time decay (theta) every day on the strikes both above and below the stock’s price at the start of the trade.

And one has to keep in mind that shorting options naked (without owning the stock) requires considerable margin buying power – one ends up needing to put up $30K to $50K to maybe make $500 on some days. That might not seem worth it, but the ringer in a day trade is it’s the same margin every day and stays the same as the daily profits pile up all week long. Oftentimes, the day by day ends up making double-digit on the margin requirement for the week (see the green cells in the table below).

Using a tight stop (like $200 per contract) and selecting the right spread of strikes prices, significant returns can be had in a month.

For August, the TSLA short strangles yielded $18,800 per contract on a maximum margin requirement of $50,521 per contract (as prescribed by the CBOE MARGIN CALCULATOR, a 37.4% return for the month (see the yellow cells in the table below).

That’s without having to know what TSLA was going to do on any given day in any volatile month of wild price swings.

(click on the table for a larger view)

$TSLA slams into an “outside day”

And it hit that wall on the day after its earnings report vaulted it into the airy realm of irrational exuberance.

All over stock market social media, Elon Musk fans and TSLA shareholders were ecstatic as the monster stock, in the midst of a world-wide pandemic and facing the prospect of a dire economic downturn, virtually doubled in no time at all. TSLA has boundless prospects long-term – long-long-term – but its recent rocket ride was crazy. Even Musk said so some time ago.

CRAZY!

So no surprise today as one of the oldest of Wall-Street adages strutted on stage yet again – “Buy the rumor, sell the news.”

The stock plummeted 163 point from its open today and 77 points lower than its close yesterday on higher than average volume, in other words the very definition of an outside day.

So what next?

Actually outside days are somewhat up in the air. In an up trend (and TSLA certainly is in one), it can be a mere bump in the road so to speak, but whenever violent action like that a happens, particularly on good earnings news, one has to see if anyone has been killed in the crash.

Today’s low, me thinks, is the line to live by. If TSLA rises above it, tomorrow, it’s a long with the today’s low as the stop loss. If it continues to drop, the low becomes the protective stop for the shorts.

(click on the chart for a larger view)

$SPY – Up, up, up…and KERPLUNK?

Just got back from a week in New Orleans so if my head feels a bit thick, don’t blame me, blame the Nawlins’ food, drink, the music.

W.C. Fields once said: “I spent half my money on gambling, alcohol and wild women. The other half I wasted.” New Orleans is a perfect city to not do the wastin.’

Anyway, the market after a break of its December/January uptrend line, took another shot and manage another high on SPY (among other index ETFs) last week but dropped back down below the January high (332.95) to close at 332.20 Friday.

Not such a big deal except the NYMO after the rally off a double-bottom earlier in the week (see the white line with the red dots on the chart below) fell with the price weakness to turn the all important NYSI (longer-term breadth) negative.

That’s an automate sell on its own but there’s maybe more…

In his book “Methods of a Wall Street Master,” Trader Vic Sperandeo says determining the trend is a simple as 1-2-3. One is the break of the trend line, which happened on the gap down from 1/24 to 1/27 (see the chart); two is the attempt to resume the recent trend that fails, which may have just happened; three is a fall back to through the low after the trend line break.

Since “three” hasn’t happened yet, there’s a chance, and maybe even the likelihood, the pattern here is just a pause before more advance but…

But Trader Vic Sperandeo’s has more. His most classic set up for aggressive traders is right here, right now. He calls it “2B”, as in “2B or Not 2B, that’s where the money is made.” The fade off the old high on Friday is the 2B, as pretty as can be (see the chart).

This a short.

And it is made all the better by the stop being close by at the old high at 334.20.

That simple. And if it follows through, without stopping out, it could be a great big KERPLUNK right at an all time high.

P.S. There’s also a bearish full moon today for those who put some store in such lunar signs.

(click on the chart for a larger view)
and

$SPY – The drop too far, too fast?

The market took a plunge today and all the why-did-it-happen pundits are citing the Chinese coronavirus fears for the sell-off.

Once again, this is news arriving to confirm what’s already happened. The NYSI, measuring long-term breadth on the New York Stock Exchange, turned negative last week. That was the tell that the market’s advance was faltering. News can accelerate a decline, but no-news would have also but probably at a slower pace.

What we have now is a fast fall and based on one of my key charts it is likely too far, too fast. See the chart of SPY below and note nearly every time the average SPY pull-back (as displayed as a histogram) pierces one of lower green lines, it bounces, and sometimes runs. The Nasdaq Composite chart is showing the same pattern.

In addition, 45 of the stocks on my nifty-50 stock list are on sells and 23 are oversold. Forty or more on sells is usually the bottom or the beginning of a bottom of a down swing.

Although today looked relatively ominous, not a lot of damage has been done – most of my bellwether stocks are only down two to three or so percent since the NYSI down turn.

So what’s next?

I think the market bounces tomorrow. The question for the week is will it be a dead cat? Or will it, in this bull market, be the start of another run to the highs?

If it turns out it’s no more than a dead cat bounce, or the market doesn’t bounce and keeps on going right down without pause, then the damage to the stocks and indexes not done yet will be done on the next plunge.

For now, as laid out in the post below the long VIX ETFs and ETNs are the play on this drop. Stops should be tightened to preserve the quick profits on TVIX (29.9%) and UVXY (22.7%). If the market weakness continues, TVIX and UVXY will no doubt be easy swing trades to jump into and out of going forward.

(click on the chart for a larger view)

$TVIX – From heads up to launch up…

On January 14th, I posted this link as a “heads up” to the what was happening in the VIX and its related ETFs and ETNs like the 3x-leveraged TVIX:

$TVIX – Just a heads up…

“I don’t know what’s going to finally trigger it nor when it’s coming,” I wrote in that post, “but when this leveraged VIX ETF turns, it’s going to explode.”

The trigger turned out to be the old reliable standby – the NYSI, the McClellan Summation Index, as long-term breadth tripped under the price surface of the market, along with the first day TVIX did not make another new low. That was on 1/22 for a buy of TVIX on 1/23 (see the blue candles on the chart).

By the time TVIX finished its down swing, it made new lows 11 days in a row, four days after the “heads up” given here (see the blue vertical line and the pink dots on the chart below) – great anyone short any VIX-related product — but that was also a sign the pop was going be a bang, maybe even more than a bang – an explosion yet to come?

Since then, three trading days ago, TVIX is up 29.9% on today’s close. UVXY, the 2x-leverage ETF, is up 22.7%.

(click on the chart for a larger view)

#STOCKS – on $AAPL gone parabolic

At the risk of a massive understatement, let’s just say AAPL has gone up…a lot.

In fact one look at its chart below reveals is has gone parabolic.

Let’s define a parabolic move first. Basically, according the website, Prometheos Market Insight, when a stock makes a enough of a move to create three distinct supporting trend lines (see the green lines on the chart below), then accelerates, it is in a parabolic move (the red line on the chart).

There is both good news in that, and bad news.

The good news you own it, the bad news its latest rise is unsustainable. Although one can only guess when and at what level it parabola ends (the way it always is with that phenomenon), but when the inevitable end comes it will likely be violent and the stock could eventually go back to where the parabolic began.

At this point, a rough estimate of where it began in AAPL is around $230.

It’s hard to believe it will ever quit going up as it’s wildly (exuberantly) rising, but I would suggest there is no profit here until one sells.

Also, one other thing to keep in mind, AAPL today, according to Yahoo Finance, has a market cap of 1.377 trillion dollars. That in itself is unprecedented in market history, but it is also nearly $100 billion higher than next highest market cap, MSFT (but that as they say is another story).

(click on the chart for a larger view)

#MarketTiming – the NYMO low above a low

One of the signs of a true bull market is the follow through off a low-above-a-low pattern in short-term breadth (the NYMO).

The signal is displayed in the top portion of the chart below.

It is buy signal for aggressive traders looking for a rally to begin off a meaningful market bottom. In bull markets, it almost always has follow through to the upside immediately. That hasn’t quite happened in recent months, which has made everything in the current market psychology suspect. See August on the chart as an example.

But it did happen today — after triggering yesterday for today’s open, there was the immediate follow through to the upside.

Now the bulls need long-term breadth (the NYSI) to turn up in the next day or two, which is the trending signal. The NYSI is the smoothed line in the middle of the chart below. It is still falling but…

If both breadth indicators get in line, there is a good chance the market rallies strongly, possibly for several weeks, maybe back to the recent highs, maybe higher.

But, of course, as has happened all through these unstable times, it will be a rally that can be killed by a tweet.

(click on the chart for a larger view)

$SPY – From Friday to Friday to “de ja vu all over again”

MARKET TIMING SIGNALS FOR 8/30/2019.

Long-Term Breadth (the NYSI): Buy DAY 2
Short-Term Breadth (the NYMO): Buy DAY 2
Price (the Nasdaq COMP): Buy DAY 2
Volatility (the VIX): Buy Day 2
Nifty-50-Stock-List: 39 BUYS, 15 NEW BUYS, 10 OVERBOUGHT; 11 SELLS, 0 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 28, Rising, FEAR LEVEL.
Bellwether Stocks: 11 UP, 4 DOWN.

WHAT?

The market, after yesterday’s buy signal on all indicators, actually followed through today with a strong upside move.

As a result of the last two up days, we are right back right back to where we were five trading days ago with the SPY trying again to break out of its consolidation box (see the grey box on the chart below). Since last Friday into Wednesday, we’ve had Trump rally-killing tweets and at least a hint that China may timing the market to compound what he does with Twitter. The market quieted down on Wednesday on light volume with solid up day.

WHAT NEXT?

The NYSI, NYMO, Nasdaq Comp, and the VIX are all on buy signals.

Trump tanked the market last Friday and maybe he can manage to blunder into doing it again but, based on the technical indicators, the market “should” have at least one more up day going into the holiday weekend.

That is about all that needs to be said except to note the Fear and Greed index is up on the day and still at a level that gives it a lot of room to move to the upside if the SPY overcomes resistance that top of its consolidation.

(click on the chart for a larger view)