Strengthening Stocks in Stronger and Weaker Sectors | Active Trading Strategies

well the more things change the more they say stay the same the market has rolled over at least the s p uh for now but the uh sameness is the same sectors are still in control we'll take a look at that stick around good afternoon and welcome everyone to active trading strategies my name is pamela and you can uh join me and barb armstrong who happens to be in the chat to answer all of your questions on twitter at pmalali underscore tda so when you can follow barb of course at b armstrong underscore tda many of you already know barb from her getting started uh segments or webcasts for getting started with options uh so if you are new please don't hesitate to get to the education tab go to webcast and look up getting started with uh options if you are in that kind of a mode before we jump into anything else so let's get rolling here with our important information and that is this is all intended for educational informational purposes only not for recommendations options are not suitable for all investors there are special risks that are inherent to options trading they can expose investors potentially rapid and substantial losses short options can be assigned at any time up to expiration regardless of the in the money amount and then the money option has a higher risk of being assigned early paper money virtual trading application will not assign short option positions early which is going to be very different than a real trading account now we're going to discuss uh technical analysis analysis today uh along with our entries and exits we'll talk about that momentarily but there are other approaches which include fundamental analysis that can assert very different views all investing involves risk including the risk of loss past performance of any security or strategy does not guarantee future results or success any investment decision that you make in your self-directed account is solely your responsibility and remember any trailing stop or stop loss order will not guarantee an execution adder near the activation price all right let's roll on out there and discuss quickly the agenda we're gonna do the uh the quick market uh sector review there's gonna be a reason for that because we're gonna look at those sectors to see uh the sameness that we've been experiencing over uh many months now as to what has uh uh the value type a cyclical trade that has uh been uh taking over from those growth names we're gonna look at some potential entries and exits uh and entry and exit criteria and make some sample trades now just because we're looking here at those sector reviews doesn't mean that we're going to stick totally with those we're going to take a look at it maybe setting up a possible trade on a discretionary stock as well so outside of what the main leaders have been as far as the sectors go over the last many months we're going to maybe step a little bit outside of that and see what happens out there in the future all right let's get rolling here okay we'll start off with the markets uh and uh just when you thought it was safe uh to jump back in it certainly looked like we were going to get and we still may get a bounce today but right now the s p 500 has dipped below yesterday's close down uh five hundredths of a percent down two points on the s p 500 it's followed fairly closely uh by the uh nasdaq which is only up a tenth of a percent and so uh one half of one or five tenths of or five hundreds of percent for the s p a tenth of a percent on the uh nasdaq but the russell 2000 holding in there uh up almost seven tenths of a percent uh out there but as far as the sameness goes as far as what we see here the sameness really lies within the fact that the energy sector is still uh keeping up in their uh top spot utility sector is in the top spot so there is still the defensive nature in there as we see with utilities and consumer staples as well as materials holding in there whoops well they're switching back and forth on me the staples versus the materials information tech took a bit of a bounce today as uh the cpi numbers came out people uh were more pleased let's say uh or relieved perhaps with the consumer price index not being quite as hot as they thought it was going to be it did come in in some aspects a little bit higher in some aspects a little bit lower so there was no real heat to the cpi index uh for today's economic announcements now that being said let's collapse this uh the vix is down by the way but not much it's still hovering in the it's still holding up there in the upper ranges above uh 20 percent but the s p 500 we'll take a quick look at that uh we've got uh some uh outside of the price weakness we're seeing today on the s p 500 the mcclellan oscillator for the new york stock exchange down here is showing that the new york stock exchange is up is the advancers over the decliners on the new york stock exchange is up uh today despite the fact that the new york stock exchange is down so we have a little bit of a divergence between advancers and decliners the breadth in in the new york stock exchange as we might see in the uh let me see here i'm going to pull up the mcclellan oscillator for the s p 500 and make sure we get all of our colors in line here we're going to talk about this in the coming weeks and see the similarities the bond ones the s p uh uh mcclellan oscillator and it is uh finding some uh finding a little bit more strength than the new york stock exchange out there right now but all in all both are showing underneath the internals of the market showing us a little bit more strength we'll see if this pullback holds the important the important nature of what we're looking at here in this pullback and and the the discussion that you might hear out there on the interweb or in your financial readings or any financial networks of any sort is there's a lot of people who are not really willing right now to call this as being anything more than what we've seen anything more than a bear market rally now we'll go back and take a look at the charts here in a second but where will we make the determination that this is no longer uh just a uh bear market rally that it's actually turned into something more bullish let's discuss that and it may have an a some kind of an effect on our decision-making process out there so let's take a look at that let me um take off the mcclellan oscillator i do not have the scripts for these yet because i still have to do some work on the uh mcclellan oscillator for the uh s p 500 so we'll just leave this as it is so uh when we look at and what a lot of people do is they they have a tendency to put the market first ahead of stocks uh you may be what you may be uh behind the curve sometimes if you do that that's why we look at the markets the sectors and sometimes there's going to be things that break out ahead of the markets but if you want them if you want the market uh indications of the market strong or weak let's take a look at some let's let's take a look at some areas in here and if i draw the the uh support line here we go underneath here uh and there you have it so this is this january uh can the uh confluence if you will of opens and closes that were very tight back here in january and these lows that are very similar back here in january fairly important area so we may see price uh get down into that error we may not and so that becomes a pretty important spot if you look at some past tweets that i did and and last week's uh wednesday's uh market and sector analysis we talked about the possibility that this may turn into something more more bullish even though this could possibly be better so a lot of people are looking for more continuation to the downside you may have heard some people say that we need to revisit these lows down in here well we might and we might we might not we may see price reach down into this level perhaps and then break out to the upside like it did in 2010 and 2011. we could see maybe a possibility even of a turnaround today and we see some upside upside pushes so the important areas that we'll look at besides the january lows it is going to be the peak the february highs over in here the 100 day moving average we're now bouncing back down from the 50 days struggling to get back above the 50 day that's not exactly totally bullish out there so uh and so that's why we'll watch to see what occurs down in here but other people's opinions uh one of the things i want you to to from a from a behavioral standpoint from your own investing is to make your own decisions based off of however you make your decisions if you are brand new yeah people probably do know more than you but nobody knows what the market's going to do if you fall into that trap of thinking somebody knows more than you do about the direction of the market be very careful with that use the levels that's why we use technical analysis use your fundamental analysis to say something is selling at a discount for what how for however you want to choose that but have a way to make your own decisions and that's why we're doing what we're doing today and how why we do what we do every day out there so looking for this to pull back here this is the the s p is still sitting you know well above these lows uh of january now if we look at the nasdaq ndx it's down in that area so we are we are there on the nasdaq down in here as we look for this to hold and see if this will hold if not then we probably should expect some kind of a retracement down into these lows and tomorrow we'll we'll touch on that again in the market and sector analysis that happens at two o'clock eastern time we'll touch on these lows and look at some similarities to 2011 is and um 2010 we'll just touch on that again very quickly uh tomorrow so that's the ndx we had strength in the russell again a bifurcated market the russell is starting to pull back down so uh vis revisit or a visitation of the old lows we'll see what happens there so but that does not mean that we're not seeing continued strength in uh the in the uh um and i hope i haven't messed this up here let me run through some stuff here okay in the energy sector let's pop this in oh that's a two that's one okay energy sector we can see here we're going to look at some things in the energy sector today energy sector still outperforming the s p 500 consumer discretionary looking more like the s p 500 so it's pulling back or we're going to get some kind of a bounce we'll look at the consumer discretionary stock utilities still outperforming we'll talk about that again tomorrow that is a sign of uh the defensive nature that is in the market right now al is as is staples and the material sector trying to hold up against the up against the resistance area up in here so this starting to become a fairly important uh important area in here let me put this on a five-year weekly chart get a little bit different view a little bit different perspective as we have this very tight flag on materials let's look at discretionary and get a little bit different perspective as and let me get rid of these lines here as we get a little bit different perspective on the possibility that we might have a change in this structuring here possible head and shoulders inverted head and shoulders continuation upside continuation pattern why upside because we have these longer moving averages still pushing to the upside okay so that's that being that let's move on to our first uh entry exit discussion in sample trades when we talk about that we're going to pop over here and we're going to take a look at lulu and talk about the entry and exit criteria because what lulu was if you if you happen to be looking at lulu early this morning the there was a possibility of an intraday entry at that point now depending on how you want to do things you've got to you've got a choice to enter in in the early morning there's people out there that say well never enter in the first half hour the first half or first hour that is so-called uh amateur hour well maybe it is if you if you're if you're just have the fear of missing out or something like that but professionals are in their trading too there's market makers there's people whose job is to trade in that in that hour so uh you know you have different ways you might want to do things so you can trade in the beginning of the day you can trade in the middle of the day you can wait till the close of the day so that's one of the things we're going to discuss when we get into that area plus we'll look at some of those sectors and look at some entries based off of strong sector stronger sector and stocks that may be making some moves to the upside here all right with that let's pop back out here i want to say a quick hello to wayne and dan and bj and saul and seattle michelle joseph robert schube uh vijay tmtm ricardo martin um chris b michael eddie walker uh crazy fox eddie's been uh eddie's been uh eating way too much if you follow if you see uh if you follow me on twitter you're gonna see somebody's tweets in there and the last two days i think he's got an issue so there's some pretty good tweets out there uh crazy fox chris crispy and let me look at some of the chats that are in here crazy fox says how do you know if there's support if there's a downward trending corridor well that's a great question we'll take a look at some of that as well chris b helped answer some of that some of those questions out there so support more likely to hold or in a previous area of support crispy says not a guarantee the price will bounce there you go all right let's get out there and take a look now let's start with lulu i'm going to collapse this side over in here and we have a five-year weekly chart of lulu one of the things that you might want to consider is the depth of this this pullback here that's a 40 some percent pullback sometimes uh they that may be a little bit deep sometimes not if we come down here and grab the drawing tool uh of the trend line we can measure this pull back here 36 that's fairly typical in a uh when a market is pulling back like it did in the bear the mini bear market of 2018 here's the pullback 50 in the pandemic but recently with lulu it's pulled back 42 so that's not necessarily out of the question in in strongly corrective markets which perhaps we might be saying we are in but you want to be possibly a little bit cautious in here so let's roll in here and let's let's uh approach trying to answer maybe perhaps using this weekly chart one of the questions that um crazy fox had about channels so i'm going to come down and grab the channel line right here and that's that two two lines there two uh diagonal lines and there's different ways to draw your channel lines we can do it this way which which struggles to fit or you can do i mean go a little bit advanced on you this is actually something that not very many technicians uh or people who uh are new to technical analysis or even people have been around technical analysis for a long time don't don't understand about drawing channels as you can draw a reverse channel line which means you're instead of drawing along the highs you're going to draw along the lows and oftentimes you'll find that that may fit better so here on the weekly chart we can see that we found some support along the diagonal which becomes very important because now if we draw a horizontal support line across here start to build a case build a a case for buying or looking to possibly buy into lululemon we can see there's been some up and downness but there's been several check backs into oops didn't want to do that wanted to do this into the lows here so there's that support off the diagonal line we've penetrated that area a few times so we've got a little bit maybe perhaps a little bit more support but they always seem to return back up to and above this dash line and so for the last four weeks we've had a possible change in the character of lululemon so to do why are we doing this to set up using the long term to set up a possible short-term trade you can see over here on the right we have earnings coming out on well you know all the way out into may may 2nd no june 2nd sorry june 2nd lost my uh lost my track of time there all right so let's as we watch this as we look at the past to try to formulate some kind of an idea what we may want to do well we see this move up and then we see a strong sideways action in here this candlestick here becomes very important because for that week there was a lot of that was an earnings week there was a lot of volume that came along with that a marked change in momentum as we saw the rsi start to move higher and a marked change in relative strength against the s p 500 as it started to move higher it's these next two weeks now we're only into the second day of this week which is this weekly candlestick right here so we're already seeing strength so far for for this week but even if it closed this week the way it is right now after we have this strong push to the upside uh this this whole three-day candlestick pattern you you hear a lot about candlestick patterns that are pretty that are very frequent out there harami's and engulfing patterns and piercing lines like we see right in here that was another indication here that maybe there was some ensuing strength coming out and heading to the upside we also have indications of bullishness here but this is what they call for whatever reason rest after battle the battle i suppose is the battle between the bulls and the bears that took place three weeks ago so what happens rest after battle after we get that big long push then we see some spinning top type candlesticks where there's some relaxation some indecisions perhaps perhaps so now we've got a long-term basis looking at some changes in in possible changes in momentum changes in relative strength against the s p 500 and if you don't know what relative strength is we're just taking the price of lululemon right here and dividing it by the price of whoops the price of the s p 500. so the s p 500 is trading right now at um 4401 so you take 375 divided by 4401 and then you can start plotting this relative strength that just tells us that it's outperforming the s p which is something you may be may be considering now when i when i started talking today or a few minutes ago the i the the discussion was that earlier today price was higher the highest it's been since that's real strong weekly push to the upside so we had a we had a excursion if you will above this high right in here or at least it met that high or somewhere close so that high was 389 15 on the 30th of march and today uh 390 76 so it penetrated that by a little bit but it rolled right back on over not a surprise but what's happening in here why is this important what are we seeing uh that is that helps the possible theory that demand may be overcoming supply well what we before you make a trade where would you want to make the trade why would you want to make the trade where would you want to get out how much would you want to buy so where you know so uh you know lots of different things go into this not just about what to buy and when to buy what what to buy when to buy how much to buy and when to get out is is become kind of the mantra over the last say 20 years or so before that it was really just just tell me what to buy well we know that that is not that knowing what to buy does not make a good investor or a good trader so what we would look to do is right now look at this price action today look at the price action we've had over the last two weeks so come down in here we'll grab a channel line and we'll put that in there so we have the makings of a flag if you will in a stiff in a stiff wind meaning we have a flagpole in the sideways action in here looking for price to make a decision it may pull all the way back down and this is another consideration so what were the considerations that we talked about a minute ago that i was talking about a minute ago let's squish some of this down in here let's go over here i'm going to split this screen some of the considerations we talked about were do you get in when it peaks above that high do you wait till the end of the day to see if it goes back above that high do you wait till tomorrow do you put in an order to buy if it goes above that high could you even do this could you even look at this and say what are my what where are areas i can get in well i can get in on a break above that today's high i can get in on a pullback to support and then a rally above that making a intraday high above the low day say that you get a low day which might correspond with and this is the last thing we might somebody may want to consider this 20 period exponential moving average so somewhere up in here a breakout a bounce as it pulls down to the 20-day period moving average and move higher in any event you're looking for what what are you looking for what kind of change are you looking for what might that be that might be a change in momentum so a change in momentum that's for mom mom's day is coming up mother's day is coming up that's another reminder right there a change in momentum from sideways to up from sideways and down to up some kind of some kind of action that says things are moving higher and that's one of the things the one of the ways that people look to place their trades so let's do that right now let's come back out here share this screen so what we're going to do is we're going to say well this is a stock that if it gets above 390 76 so let's say 391 and just use a round number not that that's a this is just for today's uh sample example trade something that you could do all the time so say 25 above is today's high 10 cents above today's high whatever you want to do as a breakout area and then you can monitor this and if it changes and it drops down to below which for some may be the exactly what they want to see and that is price dipped down to the 20 period moving average and then shake everybody out in other words look for price to undercut previous lows undercut the previous lows from here and then rally back out of there so that's kind of the shakeout fake out undercut and rally drop and pop all different types of names for it out there but we can reassess if if it keeps going down at the end of the day tomorrow we can then reassess and not have to take that trade above today's high unless you want to so what we're going to do is say well i could risk a thousand dollars worth of uh of uh for portfolio risk well how do we get that portfolio risk what is portfolio risk well if you have a hundred thousand dollar account and you wanted to risk one or two percent well you'd multiply that hundred thousand times one percent or two percent one percent is going to be one thousand dollars okay two percent is going to give you more of a roller coaster ride than one percent just please remember that and you don't even have to do one percent you can partial into this but we'll have a portfolio risk of a thousand dollars we have an exit we'll have an exit price or a trade risk below let's say this low right here yesterday's low which was 361.11 so we'll say it once it gets to 360 we'll exit out so getting in at 391 getting out at 3 360. that is 31 worth of risk in a thousand dollar portfolio or a thousand dollars worth of portfolio risk so we'll put that up here again portfolio risk eats equals a thousand risk equals which is tr this is a fixed fractional method of uh position sizing uh trade risk is 31 which is really a stop loss remember stop losses are not guaranteed to uh to execute after you're at your uh activation price so it could be could be a lot worse just remember that so you take that thousand dollars and we're gonna divide that by thirty one dollars now that says that with you can buy what well you can buy 32 shares that's your position size now here's the beauty of this fixed fractional method buying 32 shares is that if you start losing trades and you're going to run into a string of trades that are just going to go against you you take that your one percent portfolio risk the important of this money management that is so boring to most people because please just tell me what to buy and when to buy it right who cares about them the risk management the risk management's the most probably the most important thing you can think about so think about what happens here if you lose on three consecutive trades your portfolio risk is no longer a thousand dollars that might be nine hundred dollars which means you're going to risk less when you're when the market is is taking money away from you when the when you're losing and if you gain if you have four five six trades in a row that work well your portfolio risk may actually be what it may actually go to eleven hundred dollars so you'll be actually risking uh the same percentage but with more shares so it actually forces you to cut your losses when you're losing and let your winners run you know gain get a bad analogy might be to gamble when you're when you're winning and be risk averse when you're losing but we're not gambling here by any form of or stretch of the imagination so please disregard that but that's what a lot of people call it um uh pop in here crazy fox says still thinks advance a bit but tr uh advance a bit but trending down yep it is still trending down but we are building a base pattern and so let's get rid of these and this is how this is how things change is when we look at this here and this here let's get rid of this line here whoops now we have a descending wedge a descending wedge oftentimes is bullish and it's becoming bullish the from uh age-old methods of defining consolidation periods is this kind of action where we continue to penetrate lower but see demand come in demand comes in demand comes in this time right now up until today up until this week demand has overcome supply so when we put this trade in for 32 shares at 391 with an exit at 360. we're going to right click buy custom with stop remember stop loss is not guaranteed to execute so we're going to buy 32 shares click this little chain link and that puts our 32 shares we're going to sell if it goes against us uncheck this length of this because we clicked on the chart we got to uncheck this lock here and we're going to buy at 391 391 above the market so if it's above the market well we can't leave it at a limit order we have to put it in as a buy stop okay so just like on the downside a buy stops no guarantee that it's going to execute at your activation price so we're going to buy stop above the market if it if it gaps up to 392 versus 391 well maybe you'll get put in there so just remember that can happen different things can happen so there's our uh entry point our exit is going to be 360.

hit enter double check everything make sure both of these are good to cancel we want them to sit in there now remember if price pulls back you can always come in and cancel this order because these are going to be waiting orders that are going to be sitting out there so we'll click on this confirm and send double check everything make sure you've got uh everything where it want where you want it to be and then we'll send that off and i'll just sit there and wait so come back pop over here to the monitor tab here look at our working orders and here it is sitting up in here now you can always right click and cancel the order cancel and replace the order if things change your your perspective changes on that particular uh stock there so let's pop over here we can look at some energy stocks devin's trying to break out this would be very similar in structure only this one happens to already be in a longer term uptrend and if we go even further back in time to discuss what we just did with lulu here's something very similar with lulu or that's similar to lulu breaking down shaking everybody out rallying back up and starting to break to the upside pausing uh just for a moment in here after the break higher and then rallying out of there so it's different but it's similar right and that's all we're trying to do uh with lulu now with um devon if we look at the structure of this draw a horizontal i didn't want to do that you want to do that let's try this there we go we've we're seeing this little pocket it's going to be an odd drawing for a lot of people this little pocket in here becomes very important as it shook a lot of people out but rallied right back up in a state in there so above today's high above the high of march 23rd above the highs of march 9th over in here march 8th over in here this pocket becomes a a maybe a reminder that sometimes things get shaken out but people will come back in and buy ultimately the trend of this still up we draw our trend lines up in here so we're getting this kind of this look of a try an upside ascending style triangle getting very tight up in here but let's see pop into dow this is the one i wanted to kind of make another possible sample trade on this is a weekly chart of the dow why why why why because we looked at the materials sector right if we look at the material sector hook this up here click on materials very similar in structure on the weekly chart as it's drifting sideways of materials may break out doesn't have to it could break out but here's the thing let's take a look at dao remember we talked about do we wait for the do we wait for the breakout of the sector or the markets before we do anything here's the weekly chart of dao rallying up kind of building this uh formation in here shake out fake out we'll we'll take this deeper into in a second into what other geometric patterns that we might see but the change in complexion in character came in off of these lows in here so shook a lot of people out rallied up dropped back down but that day right there real strong push to the upside and then held the midpoint of this little channel we've got drawn in here really the channel is just this this point in here and if we look at that we're going to call this line right in here the neckline because we have that inverse head and shoulders look over in here as it starts to break out remember we're looking at the weekly chart yes there is earnings that are coming up uh fairly quickly next week as a matter of fact but this is just for educational purposes only uh whoops put this on a one-year chart and we can see today kind of bouncing out ahead of these earnings so some this is similar to what we were talking about with lulu is that you may get a structure in here that fails and then pops back above its 20-period moving average so this is one we'll put a small position on now on this bounce you could wait till after earnings to see if it will continue to move to the upside those earnings are still on the 21st so you still have a ways to go again looking at the same type of risk management we're just going to buy this one on a limit as it pushes above the 20 period moving average don't know what's going to happen by the end of the day certainly you can wait till the end of the day tight stop higher likelihood that the position will be stopped out look at the option chain look at your stop on well uh be objective be objective where your stop where you might want to put your stop uh probabilities are just that probabilities they're not not guaranteed to uh they're just theoretical in nature not guaranteed to uh uh they're not a guarantee because there's two sides to probability so being objective is how do you be objective well where did people buy before well they they bought here they bought here you'll see what i'm going where i'm going to this in a second they bought there they bought there and they bought there so where am i going with that well being objective we can say they bought at the trend okay they bought the trend the trends becoming steeper as it breaks out so we're getting a little bit more demand out outperforming so we can look at this this recent low and be objective that if it breaks below this low right in here strong chance it gets down to the southern uptrend line or even the midpoint down in here so we'll look at this to keep ourselves far enough away to make to make assessments in this case just price assessments there are other ways of doing it average true range how much does it move in a day and multiply that times three probably a great way uh to do that with a uh with a stock uh if you want to be more of a trend style trader or give you some room so the we're going to get in now on a limit we got a low here of uh 6003 so we'll put our stop at um 50 uh 60 or 359 so 59 we're going to get in around 63 minus 59 tells us we have four dollars worth of trade risk we know we're gonna use a thousand dollars worth of portfolio risk so we take four into a thousand that's going to go 250 times and we're going to right click by custom with stop come over here put in 250 one percent risk let me collapse this side over here and see this a little bit better unlock this we're going to get in now on a limit we're going to get out at 59. with 250 shares gonna change our stop till good till cancel you can leave the limit order as uh where it is right now uh as a day order if you wish hit confirm and send double check everything make sure you haven't put in 2500 shares or just 25 shares make sure this is your last chance to check it out and we send that off and we're filled now you can see here we're well well below the 20 period exponential well below uh the support zone uh old resistance zone up in here that's gonna give us some breathing room because stocks can do i'm going what clear out this full drawing set stocks can drop in what i call the the candle what i call a certain candlestick that is that looks uh like like not that looks like say this in the early going for the day and you get out because your stop is too close like barb was saying and then at the end of the day it looks like this and he's that's the gee i wish i hadn't gotten out candlestick so make sure that you have an objective stops and you're gonna you may get stopped out way too much all right we are set i think we've done everything we wanted to do for today uh if there is a survey please check out that survey give us your comments out there we would really appreciate that we use those comments to develop other uh other webcasts and let's take a look and see what we did well we know that the markets uh are continuing to weaken right now we won't take a look at those but we know that even though they're weakening those those late uh stage economic uh cycles sectors are still hanging in there so join me tomorrow on market and sector analysis and we'll take a look at those sectors and see if we can make some decisions on you know where we are in the business cycle and how we can continue to protect ourselves look at the breadth but we looked at those things and made some uh made some decisions based on where the money has flown according to relative strength and according to the sectors that have been the strongest over the past many many months and of course made those sample trades all right everyone i really appreciate it and i would also appreciate it so would barb if you would click on that little thing right there that will help us uh uh that will help by uh you subscribing for it'll help you find all the great webcasts that barb does and all the other td ameritrade education coaches and if you could share please share and uh like that would also help remember everything we're doing here is for educational purposes only not recommendations you're responsible for the decisions you make in your self-directed account see you soon you

2022-04-13 23:48

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