pause in the market

In the previous post  i had confidently declared that there would be a 100 + points jump in NASDAQ. The market remains irrational as long as i remain solvent. 🙂

NASDAQ fell yesterday ending an eight trading streak.

So, i cut my looses. Closed Options positions on ANET and TWLO. exited from NQH19. I am still long QLD because the market is still in uptrend. But i reduced my exposure to prevent further losses.  The reason i am long ETF QLD is that, instances of extreme professional selling remain sparse. As the Market Pulse shows, the S&P 500 shows just two days of distribution. And neither down day (Feb. 7, down 0.9% and Feb. 14, off 0.3%) was especially strong. (IBD)

IBD says this “The current stock market rally ran into some resistance Thursday, with the Nasdaq composite sinking 0.4%, back below its 200-day line. The S&P 500 index lost 0.35%, staying above its 200-day line. The S&P 500 index, Nasdaq and Dow Jones, which slid 0.4%, are all struggling around their short-term peaks of Dec. 3. High-level China trade talks resumed Thursday, with more reports of progress. But the current stock market rally has run up for nearly two months, in part on China trade deal hopes. The Nasdaq just ended an eight-session win streak.

It wouldn’t be surprising to see the current stock market rally pause or pull back for more than a couple of days. So watch your overall portfolio exposure. Don’t let double-digit winners turn into losses and be ready to cut losses short.”

Happy trading !

I have started posting on seeking alpha also

here is the article

https://seekingalpha.com/instablog/194086-larrry1/5273849-pause-market

The BEAST has acted (and thus speaks)

  • NASDAQ about to breakout.
  • Conservative estimates 100-200 points imminent in the next few days.
  • UBNT Ubiquiti Networks. TWLO Twilio. TTD The Trade Desk. PAYC Paycom Software, Inc.  Leading growth stocks.

When a Godzilla or KingKong is moving and running, it is common sense not to second guess what you see.

There is a trading maxim i learnt a few years ago – trade what you see and not what you think. at present it looks like its going to take off! 2 days the KingKong the beast called NASDAQ closed above its 200 days Simple Moving average

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you see in the following charts – the first chart is OBV – On balance volume of QLD – DOUBLE NASDAQ 100 ..when on 10/04/2019 it was 53 million shares. Just yesterday we are 12 points below the close on 10/04 and we hit 53 million shares. Accumulation.

Secondly, look at the second chart of NQH19 futures contract. Incredible ascending triangle! Breakout imminent on NASDAQ.

other signs – Both S&P and DOW Jones have easily surpassed the 200 day SMA recently which just acted like token resistances (according to IBD)

Screen Shot 2019-02-20 at 11.54.38 AMScreen Shot 2019-02-20 at 11.37.19 AM

process trumps results all the time

  • NASDAQ Composite’s closing day’s price is the most important price.
  • Market index itself will tell us the conditions of market.
  • Trend reversals or transition points is where maximum ROI is made.

I have heard that from FT 71 

Futures Trader 71 aka Morad Aksar. He is a well established day trader but i am not a day trader but i have learnt some tit bits from him.

Another important truism/maxim i have learnt in theory and practice is this : Preserve your capital at all costs. In theory i have learned it at Options Express 2 day courses with George Fontanills. Practically after losing much of my profits i learnt to add this : Preserve your profits at all costs too!

why? When we transition – right at transition times is when we hit Gold mine.

Let me explain : Now you see the NASDAQ daily chart. On December 24th 2019 we hit 6190 and 50 days Simple Moving average was 7164.  The difference of around 1000 points.

Since we know at this blog that the price is the only true North Star and we would have been in short position for this long. We expect the price to continue trending down till it does not.

Now next day we have December 26th, and we also know that the closing price is very very important and significant. All the billions and billions of dollars and savvy money managers and hedge fund gurus and Mutual funds all fight it out and finally come to the days end and a closing price. The most significant price for the day. December 26th it closed up around 361 points.

Has the trend reversed? We don’t know, but the wonderful big green candle catches our attentions since we are attended the heart beat of the market which is nothing but the index like NASDAQ Composite.

that is the first day of attempted rally. why ? the closing price was higher than the previous days closing price and by a whopper!

we wait and see and by Jan 4th after 7 trading days it is alright up by around 525 points from the low of the first day of attempted rally. It was day 7th follow through day of the attempted rally

System developed by William J. O’Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.

A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn’t make a new low.

Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.

In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.

Now we enter the market always always with a stop and right now the market is up 750 points from the entry.

happy trading!

 

 

 

What to make of the market?

This site’s philosophy is very simple. I feel (I hope I’m humbled by this ..or rather i hope I’m humbly starting this): This site’s philosophy is sublimely simple : Price is the only true north star. I want to simply mimic the price. Price is rising and i am buying. Price is falling and i am selling.

what i mean by that is this ?

Let me put it in a different way. Say you are conservative. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

QQQ or the cubes which track the NASDAQ – 100 has a beta of 1.10 ..roughly it mirror the NASDAQ – 100. AMZN , Amazon has a beta of 1.71.Netflix NFLX 1.53.

there are ETFs dedicated to High Beta or it’s implications – momentum stocks!

Now QLD , which daily doubles the NASDAQ – 100 has a beta of 2.25 !!

Say Jan 4th 2019 when the market started its rally you bought 100 shares of QLD for 68 dollars.  On Feb  6th 2019 it hit a resistance at 200 day SMA and then next day you sell at market open (it confirmed because there was a gap down). You sold at 79.

So you went in with 6800 dollars and now you have 7900 dollars.

Now if you look at market and it is dropping on high volume end of the day prices you know the market is in downswing. Say it drops down to 70 USD, and you get in based on simple end of day price action. Now you have 112.8 shares!!

See you accumulated assets slowly! In QLD or for that matter NFLX or AMZN wealth is accumulated by accumulating shares by being in cash when the market is falling!! and getting in when the simple price volume actions says the trend is reversing from going down to going up.

Buy at the top sell at the bottom.

Profit in assets are only made at the price you buy not at the price you sell. So you go long (buy) at the beginning or there about of an uptrend or go short (sell) at beginning or thereabouts of a downtrend. Since price is the only true North Star. One ‘exits’ at the top or bottom to make true profit and to accumulate assets. In both cases – long or short – you are buying low and selling high. THIS DOES NOT MEAN YOU ARE ACCUMULATING ASSETS AS PRICE IS FALLING. In fact it is exactly opposite to it. Accumulating assets as prices are falling is buying high and selling low ( you sell low because you can’t bear the pain of loss). You always accumulate assets when price is rising.  You exit assets when it’s price is falling.

Happy trading folks!

 

 

qld – double nasdaq 100

The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.

Now QLD is proshares ETF. This leveraged ProShares ETF seeks a return that is 2x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Now compounding is amazing concept in a up trending market!cdd8afea0d4bfb10c19630c80e8d842b

in the chart below the red line is QLD ..In 5 years its up 216 % compared to less than 92 % growth for NASDAQ -100 !

 

Screen Shot 2019-02-06 at 5.41.13 PM

Happy trading !

 

 

 

 

 

Nasdaq all the way

Now there has been new highs since December 26th 2018. Market has been up and this rally has been going on for 27 days !!

NASDAQ faces a new test shortly – 7450 to 7500 is a critical resistance. Currently it is around 7350.  it is facing in 100 points a century figure and 200 day Simple moving average (SMA)

87.2 % of S&P 500 stocks are above their 50 days SMA. NASDAQ is about 400 points above their 50 days SMA.

High volume selling in NASDAQ and S&P 500 is just 1 in the last 27 days !

the industry group of Enterprise Software is up 30 +% in 2019.

PAYC has shot up 5 dollars yesterday and it’s EPS is due on Tuesday Feb 5th 2019

the top 5 stocks in this group are

  • 1
    CRM SALESFORCE.COM INC
  • 2
    FIVN FIVE9 INC
  • 3
    NOW SERVICENOW INC
  • 4
    PAYC PAYCOM SOFTWARE INC
  • 5
    PCTY PAYLOCITY HOLDING CORP

the beast is rousing itself up

it is a big beast – there are big big players with billions of dollars trading the market every day

For Jan 30, 2019

Share Volume Dollar Volume
Total Volume: 2,567,771,292 $129,267,339,122
Block Volume: 507,812,429

 

Number of Issues: 3,397
Number of MPs: 428
Total Trades: 13,602,488
Block Trades: 13,278

Now for small time folk like me, the deluge of money and trading will overwhelm me. that is why i will not day trade. 2.5 billion shares are traded and i am not capable of knowing what is going to happen because my position can be wiped out in a min.

also total dollar volume is 129 billion

that is why end of the day price is so very important . why ? Because after all the fighting and back and forth snd trying to decide on the tug of war and over and over again money and stocks trading hands. at last they come to a market agreed price.

this is the price market has agreed, P/E ratios or sales figures or Forward looking EPS etc all the knowledge is finally found in that price. All the billions of dollars of super computers and auto trading and algorithms and quants have come up with this price.

 

and i should respect it.

2700 was a strong century figure resistance for S&P 500 and then for NASDAQ it is 7000-7200.

On higher volume both crossed that number yesterday at the end of the month

screenshot2019-02-01at11.49.46amscreenshot2019-02-01at11.49.30am

i am long on QLD and AMZN call.