Here’s Dan’s update on our Active Trade List, and some tactics for trading this choppy market. – January 18, 2022
SPY TNX--X COMPQX MDY WM DIA YT QQQ ARKK TWLO TWTR KLK AMAT KLAC EPAM LRCX SEDG MCHP KLNX NVDA QCOM TER DWAC TECK FCX NSC DJUSRR UNP CSX
In this video, I am going to go over the major averages and then our active trades. On the SPY ( NYSEARCA: SPY ), I have been mentioning this for quite a while but it just kind of feels like a bull trap here and I think that is what we are getting. We are getting this rebound, as we have had before, a rebound off the trendline reestablishing this as a trendline, and then we are getting a lower high versus this time and now we are at a new low. So don’t get me wrong, nobody really knows. This could very well turn out and we could get all new highs or not. It could continue to give us a lower high and then a lower low and then it is more of a topping pattern.
The reason I am mentioning this is, not to cover my own butt, just to explain to you that we really don’t know and you just have to trade according to what you see, not what you think. Believe it or not, you’re really not paid to think in this business. There are nuances to that, you have got to be smart but you can’t think you know too much. I am looking at this though, and the overall trend is still good. So would you say the S&P is going lower, oh, it’s going to reverse, we are in a bull market? I can’t say that because I don’t know. I am just saying this, follow the bouncing ball. Right now we’ve still got about 20-minutes to go till the close and we are not getting a good close.
My sense had been today we will probably get some kind of a goofy rebound but it won’t amount to much. I was wrong, I don’t think we are getting a rebound at all and I think that one of the biggest reasons is the Treasury Note ( INDEXCBOE: TNX ) is spiking up again. Apparently, the Fed is unable to buy bonds today. When they buy bonds it drives the yield lower because they are inversely proportional. You get the same amount for a bond and if you pay less for it then the yields are higher. If you pay more for it the yields are lower, that is just the way it works. So they said that there’s a glitch apparently so they can’t buy bonds.
Editorializing for a minute, I feel like the Fed has been one big glitch since it started. We never got any market volatility like the way we do now, that’s my feeling about the Fed. I am sure some of you are listening to this and thinking the Fed is the best thing since cloth masks.
As long as rates are going higher you are going to see markets repricing that. That leads us to the Nasdaq Composite ( COMP ). A little bull trap, which I had kind of suspected, and now that trap continues to go. This is definitely a change in character versus this ( COMPQX ) you see. So tech is really kind of falling out of favor and that’s also the case when rates are going lower. Because generally speaking, and it is a generalization, which they are all well deserved, generally speaking techs are borrow intensive, in other words, they will have debt. They need to borrow money in order to finance their R&D, etcetera, etcetera. So that’s why I think you are getting a real bleed out of that
Then the MidCaps ( NYSEARCA: MDY ) and Small Caps ( NYSEARCA: IWM ), neither one of these are doing very well either. The Diamonds, the Dow Jones Industrial Average ( NYSEARCA: DIA ), testing the 150. Look at the weekly chart, basically flat. You can look at this and say, oh, it’s still doing well. Sure, because you have got this as a context but if you do it this way then maybe it doesn’t look so great, it is just kind of barely drifting higher. So I don’t put much faith in this either. Though, my suspicion is, you will see a rebound tomorrow for no particular reason other than technical.
I would look at the S&P ( NYSEARCA: SPY ) that way. I would be really surprised if the S&P ( NYSEARCA: SPY ) did not go higher tomorrow. I would be really surprised. I think we are going to see a rebound from here. We will probably see a rebound here ( NYSEARCA: DIA ). We will probably see a rebound here( BATS: IYT ), basically all of them, ( NASDAQ: QQQ ). I think we are going to see some kind of a rebound tomorrow because that is what stocks do. It is not amounting to much, not in my book. In my trading account, I literally have just a couple of positions and I am going to cover both of them today. I have a lot of cash and I am getting in better shape because I am spending a lot of time exercising because I know there is nothing going on in the market.
We’re looking a the Nasdaq, can’t help but look at bubble vision here, ARK ( NYSEARCA: ARKK ). You know all about this, Cathie Wood is the new messiah. A 50 percent decline from the top is at $80.00, it’s below that now. The adage is that 80 percent of all super high flying stocks when they top they will ultimately go down 50 percent; 50 percent of them will ultimately go down 80 percent. It’s funny, Bill O’Neil, that was a study that Bill O’Neil did. I have looked at several of the high fliers and so far there are a lot of them that are in the 80 percent group that is at least down 50 percent.
So this is not the kind of place that you want to go to. The CEO, whatever you want to call it, of ARK ( NYSEARCA: ARKK ), Cathie Wood or Woodshed, said that she expects, of course, we all expect certain things, she expects the compound return for the ARK ( NYSEARCA: ARKK ), maybe just for the innovation here but it’s probably because it’s all bullspit, it is probably all the ETFs she has, like 40 percent compound return. I don’t know, seriously, if she is talking about every single year that you are going to make 40 percent or what it is. But she is predicting amazing wonderful things from these uber-cheap worthless companies that she owns.
Here is why I am going into this detail, a lot of our traders, you get it. You have seen this, you are technical. You look at certain stocks, I am just thinking about one, you are looking at Twilio ( NYSE: TWLO ) and it was awesome back here but you are not enticed about it now. I am just picking this chart out. A lot of our members, you look at this and you are not looking to buy Twilio ( NYSE: TWLO ), I’m going to get it at 200.00 and that will be awesome. You see what’s happening here, it’s kind of what I am talking about, we can see this. It is just kind of rounding out, this is not the area that you want to be in. And so it is the same thing with this ( NYSEARCA: ARKK ).
At some point in the future, maybe tomorrow, maybe a decade from tomorrow. But at some point in the future these tech names, these disruptors, things like that, all these disruptive companies, at some point they are going to start moving higher again, there is no question about it, we just don’t know from where. This is the thing, I’ve seen, I think it was a member posted in the forum, but I think it was more likely on the cesspool known as Twitter ( NYSE: TWTR ), another awesome stock, where somebody was saying, over the next 5-years, and listen to me, this is really important, over the next 5-years she could turn out to be right.
And this is a key point, maybe that is true, perhaps that is true, let’s say that is going to be true. The question is until this is proven to be correct over the next 5-years, do you want to have your money sitting there being wrong, knowing that some time over the next 5-years you are going to be right? That is just a risk of price and time. In other words, you are risking a reduction in price, because guess what? The trend is lower. That’s what happens, trends continue until the one magical moment when they end, this isn’t it.
And so you are holding a stock through a pullback, to where the price that you paid is much higher than it is. So every day or every week or every month you are continually wrong. And so you are getting clipped this way on the price. But then also, time goes on so you are getting clipped on the x-axis as well. So you are just wrong all the way around. Don’t do that, instead, decide what your time frame is on things and if you are a day trader, it’s your 1, 5. and 15-minute charts, but decide what your time frame is on your position and don’t deviate from that.
Don’t ever catch yourself saying like what I just said here, where you are kind of rationalizing. And let’s face it, you are looking at the glory days here, and this is beyond ARK ( NYSEARCA: ARKK ), it could be on any company, on any stock that you made good money on or you didn’t make good money on and you are mad. The stock goes up like this, it’s awesome and then it goes into this phase and then finally starts coming down here. And so what you are thinking about is, you are still thinking about the glory days, and you are seeing this go lower. And you are not getting the fact that you have had like mental style drift. You are no longer a trend trader, now you are a, I want to be a right trader.
So you are fixated on this stock and it’s not for technical reasons because this thing sucks, so that is not it. It is not for fundamental reasons because I’ve said this before, there is literally no way to gauge fundamentals on holdings in this, any actively ETF. You are basically holding a trading account. And so I could look at all the various stocks in my account and look at the fundamentals on them and say, my account, therefore, this is what the fair market value is based on the fundamentals. But I can’t even do that because I would have probably ditched one of my positions before I even finished with the analysis.
So you have to understand that in this market, I’m telling you, if you never look at another piece of fundamental data, this is a pro-tip, if you never look at another piece of fundamental data on a stock, but instead, just say, I will just follow the chart, I will just follow the trend. Do you know what? You are going to do better. I promise you, you are going to do better, you can thank me later. Stocks trade technically, some would say, and I would, that they always have but because of the financial information, it is so much more readily available now than it used to be, that knowing the fundamentals of a company doesn’t give you an edge. It literally doesn’t give you an edge and so you have got to just trade technically.
And when you see this type of thing, just stay away from it because the only reason you would own this stock is that you thought it was going to do this. You don’t get to think that, that’s silly. That is the only reason you would buy it because if it instead does this, maybe zigs and zags here a little bit then you were wrong to buy it here. Because you did not expect it to do this, you expected it to do that. And so one thing in trading, you have to expect to the expected, not the unexpected. When you are trading the unexpected you are guessing, Never forget that.
And again, we can look at all the various stocks in this ETF, or frankly, do you know what? In the Nasdaq Composite, again, it’s beyond ARK ( NYSEARCA: ARKK ) here. I am just saying don’t believe last year’s bullspit and think that it still applies when the chart looks like this because it doesn’t. But with respect to all tech ETFs, you can look at the XLK ( NYSEARCA: XLK ). You can look at these, we could bang through them all but I am not going to. We will just kind of look at the bad ones. EPAM ( NYSE: EPAM ), are you going to buy this stock now? Oh, it’s cheap, $500.00, no. Some of these ( NASDAQ: SEDG ), ( NASDAQ: MCHP ) no. I am not looking at any of these ( NASDAQ: XLNX ) to where I am saying I have to get them while they are hot. Maybe AMAT ( NASDAQ: AMAT ), you keep looking at that. What I am saying is, so many of these stocks ( NASDAQ: NVDA ), ( NASDAQ: QCOM ), ( NASDAQ: TER ), there not where you are going to make money right now, that’s what I am saying.
I will tell you where you are going to make money, and I posted a Free Chart of the Day here on this ( NASDAQ: DWAC ) last week and noted that my price target on this is $100.00. And I acknowledged it’s a wild “asterisks” guess. Just looking at the squeeze, I have seen these types of squeezes before and they always go farther and faster than you think they will when they pop like this they always go here. So does that mean sell at $100.00? No, not at all, it could blast right through it. It is just a price target I picked to say, alright, where do I think it is reasonable for this stock to go?
What is a reasonable target for this, not a prediction, but a reasonable target just based on, frankly, experience?. Based on the number of charts that I’ve seen. And to me, $100.00 looks like the deal. And at a minimum, I guess that is what I would say. At a minimum, I would expect this squeeze to play out to $100.00. That’s where I am. It’s one of the bigger positions, actually, it’s not quite so big now because I traded out of some of it today. I sold some of it, I will give you the full deal; I sold some of it, and then I bought some of it back.
I just kind of wanted to take some of it off the table, kept some, kept the rest, but then, ultimately, bought it back because I think the stock is going higher, so this is a big one. Our stop right now, if you are trading along here, is 72.40, which blocks in a slight profit. But if you are selling now, and we are up over 15 percent now, but if you are selling now you are locking in a profit on your entire trade because let’s say you are selling at a 15 percent profit on half and you set your stop at break even on the other half. That is if the stock implodes and you are stopped out you are guaranteed a 7.5 percent return. Personally, I think it’s going higher.
And then Teck ( NYSE: TECK ) is another name that we are in. This just continues to run, it’s really all we can say, 30.10 is where we jumped in so we are doing okay. And then Freeport ( NYSE: FCX ) is still running along too, the basis is 41.30 so we are up a little bit on that. I like the way this pattern is shaping up. I like the way this ( NYSE: TECK ) pattern is shaping up. We did get stopped out of Norfolk Southern ( NYSE: NSC ). I kind of had high hopes for that, but now we are getting all the rails ( INDEXDJX: DJUSRR ) coming off, basically, coming off the rails, derailments all the way around ( NYSE: UNP ), ( NASDAQ: CSX ) so I would stay away from those.
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