Actionable Trades: SPY, QQQ, AAPL, BIDU, GLD

SPY opened positive and stayed positive until the Fed announcement. It initially popped just before the announcement, and then fell sharply to break lows of the day. But this time around, dip buyers stepped in aggressively and the market staged a historic rally, with the SPY rallying 7 points in the last 80 minutes of trading.  SPY closed the day around +4.7%.  The bounce that traders were looking for finally happened.  There was a clean 80/20 reversal trade in SPY on heavy volume.  Seeing how the market bounces over the next several days will be important to judge the intermediate-term outlook.  This should lead to a Day 1 in a short-term rally, and it's very possible this was the bottom of this move. Use today's low of $110.27 as the reference point.     Below is an hourly chart of the S&P with outlined Resistance Areas.  The Breakdown level is 1260-1250, which will be heavy resistance/"line in the sand."   We saw a rally across the board in the last hour of trading.  There was early strenght in high beta tech leaders, which never broke below the lows of yesterday.  Below is a chart of the QQQ's, which put in a reversal bar on the daily chart today.  The QQQ's were 16% off the yearly highs at the lows of today. AAPL was a stock that acted best when the market was getting hammered.  Although AAPL had a pull-off from highs, it held support of the 50-day moving average, whereas the S&P is trading far below key moving averages.  AAPL was 12% off the yearly highs at the lows of yesterday.  The stocks that acted best when the market was in correction, are the stocks to target for longs when the market rallies. BIDU showed relative strength to the market today, closing over +10%. This is a stock to play if the market rally can continue. GLD opened at new highs again this morning and was very extended on the longside.  As we saw a lot of reversal trades in stocks and indicies that were extended to the downside, there was also a calculated reversal trade on heavy volume in GLD through the 80/20 strategy, as GLD failed to hold new highs.  If this trade leads to more downside action, it could breed confidence to a bounce in the market.  STOPS in GLD 80/20 Trade: $173.15 (today's high.)

Actionable Trades: SPY, QQQ, XRT, AXP, NFLX, GLD,

Sellers came into the market early and faded the small gap up in the indices. The move was fast and broke some key support areas in the SPY, including the low from the Japan crisis, $125.28.  Going into today, the market had 8 straight days of selling, and with oscillators showing very oversold levels traders were looking for a bounce. When selling intensified early in the day and appeared climactic, it provided an 80-20 reversal entry. 

After the market was pressured for the first hour of trading, the leaders in the tech sector like AAPL, AMZN, NFLX, and BIDU started bouncing off the morning lows, giving some indications that the market could bounce as well.  A calculated way to buy the dip is with the 80/20 Reversal Strategy. In this case, it was a buy against the morning low, $125.53, with an additional add through the previous low of $125.49.  This reversal strategy is a way to capitalize on an oversold bounce when the market was extended on the downside.  The stop on this trade is $125.53.  Now that we have the strategy we need to see what this leads to. Is it the start of a new move or just a cash flow trade to relieve some short term pressure?  $127.50 is the first resistance area, which is the retest of the neckline in the macro Head and Shoulders Pattern, and the next major resistance area is $128.30-.80, a retest of the 200-day moving average.     

 

QQQ, the stronger index compared to the S&P, the DOW, and the Russell, gave an 80/20 Reversal trade as well.  This is a calculated strategy to buy a dip.   
         

The XRT, the retail ETF, gave an 80/20 entry today, as well.  After seeing a few days of selling, the prudent trader is patiently waiting for an opportunity to buy a dip for a potential reversal trade.  This does not mean the selling is over in the XRT, however it is a good, calculated trade for cash flow, when entering into oversold territories.

   

AXP is another example of an 80/20 trade.  ENTRY: yesterday's low: $48.50.  STOP: low of the day: $47.53.  This could be the start of a swing trade or it could just be an oversold bounce to relieve some short term pressure.  Watch the price action to take profits on the trade.    

  

    

In yesterday's newsletter, NFLX was highlighted as a market leader that started breaking the upside momentum before the market.  Also, NFLX had not closed below support of the 100-day moving average which was $250.92 in a few years.  It came into this support in the first hour of trading before bouncing and closing the day +1%, showing relative strength to the market.  NFLX is creating a steep downtrend line as it pulls off from highs, if it trades above the downtrend line on volume, that will be next entry in NFLX.  Use this as a gauge for the market.  

Today we saw a lot of 80/20 reversal trades as stocks and indicies were extended to the downside.  You can also use the 80/20 strategy to find a calculated short when a stock is extended on the upside.  Gold opened at new highs this morning, and gave a calculated short entry when it began to trade through yesterday's high of $161.62.  Stops are today's high, $162.86.  If this trade leads to more downside action, it could give more confidence to a bounce in the market.  GLD could see a move down to $155.40, the 21-day moving average, without causing any technical damage to the recent strength.

 

Actionable Trades: SPY, QQQ, BIDU, AAPL, OIH, RIMM, NTAP, RVBD

SPY got hammered today as investors begin to take the possibility of a US debt default more seriously, trading below key support levels. SPY closed below the 100 and 50 day moving averages today.  For now, it is time to stay light and in a wait-and-see mode as things are uncertain regarding the debt ceiling situation.   $129.63 is the next point of reference. Look to market leaders to buy potential dips, but don't start too early. Tail risk is high right now.  

Potent down day in QQQ, as the Nasdaq led all indices down 2.7%.  This is a sign to lighten up on your positions, but $56.87 is the key level to hold for strength and upside momentum.  Watch the price action and be cautious. 
    

There will be an opportunity to buy back market leaders once this market settles, and BIDU is certainly one of the market leaders after a strong earnings report.  This is a stock to buy a dip, but wait for key support levels.  First zone to test a buy back is a retest of prior highs: $156.06-$152.90, which is the 10 day moving average.  If that zone doesn't hold, look to bigger support level of $147/$147.50.  BIDU is trading far off its moving averages, it would be healthy to see some digestion in this stock before working its way higher.

AAPL is another go-to stock for strength after a blockbuster earnings report this quarter.  AAPL is extended well off its moving averages.  First spot to test a buy back is $383.90, which is the low from its earnings gap and coincides with the 10 day moving average. The next level to test a buy back is $366-$364.90, a retest of prior highs. 
     

It was noted earlier this week that the OIH's were coming into the resistance area that was highlighted from the previous buy entries, which was a good spot to lighten up on the trade.  $155-154 is the first area to test a buy back.  $150 is the next key area to hold in the OIH's, which is support of the 50 day moving average.  Remember to buy dips in the market leaders when the market is in correction mode.     
   

  

When the market has big down days like we saw today, look to the stocks highlighted in previous newsletters that are showing relative weakness.  RIMM (July 14th), NTAP (July 14th), and RVBD (July 25th) are weaker than the market and are trading below key moving averages .  The market closed the day -2% and these stocks closed -5.95%, -4.5%, and -6.3% respectively.