Will Q1 Earnings Season be the Impetus for Price to Break-Out of this Consolidation?

The stock market has been doing a good job of late chopping up shorter-timeframe traders.  Here is how I see the market …

S&P 500 Index ETF (SPY) – Weekly Chart

The above weekly chart highlights the fact that we are clearly in a corrective pattern for the SPY off of an extreme trend strength warning signal (dark blue candles) made by charting software … we are now in a position of having the ATR in resistance, so until we can get a better idea of this weekly price structure, it behoofs traders to take caution with their overall exposure to equities.

S&P 500 Index ETF (SPY) – Daily Chart #1

The daily chart shows that we are in a bigger consolidation pattern and are no longer trending … traders have to be more nimble in this type of trading environment.

S&P 500 Index ETF (SPY) – Daily Chart #2

Even if you are a big equity bull, it is not clear yet that the corrective pattern is complete … the C-wave of the correction did not actually go down to make a new lower low below the A-wave low.  Typically that last push to a new minor low is necessary to take out stops and set-up the squeeze higher out of the corrective pattern.  Also, the market usually makes one fake-out move to the upside to get the weak hands out of their shorts and to get the naive bulls more aggressive.  If that happens here again with this price structure, I would expect price to push higher for the next week that would peak above the trendline off of the two prior highs – that break would get many traders further committed to new longs as they “play the break higher”.  The market tends to bitch-slap this early break-out attempt.

I would then think that the market pushes down to make that new C-wave low … that is when we will see if this is indeed a corrective pattern and we can therefore make a more legit move to attempt a break of the prior highs.

S&P 500 Index ETF (SPY) – 195 Minute Chart

The bigger question I am still monitoring, however, is whether or not we are making an ABC correction or whether we are making a bigger 1-2-3 price structure that is part of a much bigger distribution pattern or even the marking of a very important market top.  If we are making that bigger move, then look for SLOT resistance to hold and price to turn lower.  Maybe that move lower starts after monthly OpEx or even closer towards the end of April??  We shall see …

Cheers … Leaf_West

COST Update …

Earnings for Costco aren’t scheduled to be released until May 24, 2018, but COST’s stock looks like it is ready to break higher out of its latest consolidation pattern.  Here are the charts …

COST – Daily Chart

Everything on my chart indicators points to COST making a move higher here … I am long June monthly call options and plan on trading the stock going forward here as it begins to get some mojo.  Here is a closer look at the break higher with the 195-minute chart.

COST – 195 Minute Chart

Cheers … Leaf_West

I Like JPM Here into Earnings …

I think Q1 earnings reporting season could provide the market with a much more bullish backdrop for equity traders … one stock that reports this week is JPM, which leads the bank reporting season off when it reports this Friday before the open.

JPM’s chart suggests that the most likely short-term path after the report is to the upside …

JPM – 195 Minute Chart

The trend strength histogram has pulled back into the Chop Zone and looks like it could be signaling an upcoming expansion phase.  If that is what is going to happen, then the break higher by the relative strength indicator suggests to me that the stock wants to go higher if the earnings report is anyway half decent.  I am long call options that expire in May.

Cheers … Leaf_West

AMZN … Where will the Music Stop?

AMZN is paying the price during this market correction for being so widely held and for having run so hard for so long.  Where is support likely to re-appear?  No one, knows and I think that will depend almost entirely on when the tech market gets a bid finally.

Here are the levels I am looking at …

AMZN – Weekly Chart

The weekly broadening price formation has seen price pullback to the upper support/resistance line.  Will price find meaningful support here at around $1375??  Maybe …

AMZN – Daily Chart

On the daily chart, I can see what looks like a nice band of prior volume in the $1125 – $1200 zone … with that zone in mind, I decided to sell some OTM put options that expire before the next earnings date (April 26th).  I sold some of the $1150 puts that are going to expire on April 20th.

AMZN – 195 Minute Chart

I continue to trade AMZN as my main focus intra-day, but I am not yet prepared to hold any long/short position overnight.  Selling some OTM puts at that $1150 level is a much safer way of making a multi-day bet on what will happen to AMZN over the next couple of weeks.

Cheers … Leaf_West

Ready for the Charts to Resolve Themselves …

It looks to me like the market is not sure what to do next …. earnings are expected to be great for the remainder of the year, in part because of the tax reform pushed through by the Trump administration.  The next corporate earnings reporting season begins in a couple of weeks, and with the first quarter’s OpEx getting behind us with the conclusion of this week’s action, I think that the market is going to resolve the mixture of signs that it is currently presenting us.

Here is what I mean by that …

S&P 500 Index ETF (SPY) – Daily Chart

The S&P 500 daily chart has clearly pushed higher of off the early Feb correction lows … while price has pushed up into resistance, the trend strength histogram has pulled back in a corrective/consolidation move.  That indicator is now in the Contraction Zone and after a contraction phase, traders should expect an expansion phase to follow.

Will price expand higher or lower … I think the market wants to go higher, but earnings and the marginal buyer of equities is going to have to help things out going forward.  Typically I like to see how the other parts of the market are doing to get a sense of which way the S&P 500 wants to go.  Before I do that, let’s take a look at the 195-min SPY chart.

S&P 500 Index ETF (SPY) – 195 Minute Chart

You can see more clearly that price has really only pushed up into the SLOT resistance zone, and has not really finished resolving itself yet.  The indicators included on this chart clearly indicate that bulls need to be a little careful here getting too big too quickly with their position sizes.  There will be a time to make bets for the next expansion phase, but right now is not the time, or at least that is how it looks to me.

NASDQ 100 Index ETF (QQQ) – Daily Chart

Tech stocks have without a doubt been the market darlings for quite some time now.  I won’t show them here in this post, but the FANG stocks don’t look like they are going to be able to lead the market here for the next little while.  Another sector of the market may need to step-up to the plate here for the next break higher if that indeed is what is going to happen.  The Tech Sector represents about 26% of the total market now so Tech is undoubtedly an important driver going forward.

Russell 2000 Index ETF (IWM) – Daily Chart

The IWM ETF has bounced up to the prior high … the next couple of weeks into earnings season will be an important catalyst for the small-cap index if price is going to break out sustainably into new-high price territory.

Cheers … Leaf_West

TSLA Update – March 16, 2018

I last wrote about my short in TSLA on March 1st (click here) … I still have my September monthly TSLA $350 Puts and I continue to write OTM puts and calls while I wait for the real big push lower down into the next obvious level of support.  Here is an update of the charts.

TSLA Weekly Chart – as posted on March 1st

TSLA Weekly Chart – current

The weekly chart has not really started its next major push lower yet, but this week’s candle will be making a new lower low out of the consolidation activity since that March 1st date.  The daily and 195-min charts look like the next expansion phase lower could be happening once we get the March monthly OpEx behind us.

TSLA Daily Chart

You can see that the daily ATR support price is at $324.06 … TSLA is trading today below the $323 level so it is likely that the daily ATR support level is going to be broken with today’s close.  The R/S indicator also looks like it is going to give a sell signal some time in the near future.  I like to see price and relative strength confirming each other.

TSLA 195-Minute Chart

None of the operational data that has been announced this month has really supported an operational turn around at TSLA … lots of senior management have recently left TSLA and that typically is not a great sign/signal for bullish equity investors.  The next major event for TSLA will be the quarterly auto sales figures … they are typically released within the first 5 days after the quarter ends, so that should make the start of April a pivotal one for the battle between the bulls and the bears in TSLA.

Cheers … Leaf_West

Possible Weekly Pivot Reversal Candle in TSLA??

I have been waiting for the right time to begin shorting TSLA again, and today is the day where I decided to begin.  Here is how TSLA’s weekly chart looks to me …

TSLA Weekly Chart #1

The weekly chart has been in a position of ATR resistance for quite a while now … while that has been the condition, relative strength vs the SPY has made a nice looking bear flag or pendant/wedge pattern, and  money flow continues to leave TSLA.  I think this week has a nice chance to be a pivot candle for price to begin heading lower in earnest.  The early February weekly candle was the warning shot and I was waiting for a failure bounce to the upside to begin a put position and begin getting more active at shorting the stock outright (especially intra-day).

Price has hugged the median line from the broadening price pattern and to me it looks like we could be about to break lower and head down to the lower support line as a first real support level.

TSLA Weekly Chart #2

So price made a nice bounce right into the SLOT resistance zone and now it is likely, in my eyes, to begin the next leg lower.  Will that be the “C” wave of an ABC correction pattern, or will it be the next major leg in the death knell of TSLA, i.e., the 2nd wave of a bigger 3-wave pattern.  If it is just a ABC, then price will likely find support around $265 … if it is a bigger move lower, then $230ish is the likely bigger support level.

TSLA 195-Minute Chart

We didn’t go on to make a new higher high before we look like we made a second break of ATR support … this is the “double-crossover” I like to see when trying to catch inflection points.  The 195-min candle closed a couple of minutes ago and it is still holding on … the next candle closes at today’s cash market close (4pm – $336.10).

TSLA 65-Minute Chart

The 65-min chart is in the position of resistance now and Tuesday’s high ($359.99) will not be broken if my price structure read is correct.

Nothing in my following of TSLA’s fundamentals makes me think that we are going to see a great 2018 operationally, so this could very well be a pivotal year for TSLA’s stock price.

Cheers … Leaf_West

US $ Update – February 23, 2018

I’ve been holding off updating my last US$ analysis until I was more certain that a low for my projected Wave 3 was in place, and I think that is pretty likely with this week’s close.  My last analysis was done on September 8th when I thought that we had just completed the Wave 2 lower in what I was predicting to be a 3-wave move … that analysis turned out to be pretty accurate (click here).  Here are the US$ monthly and weekly charts I posted back on September 8th. Continue reading

The Bull/Bear Scenario …

Yesterday’s high of the day was $270.00 for the SPY … that took price officially into the SLOT resistance zone that I like to monitor for counter-trend rallies.  Due to the strength of the move off of the prior highs into Friday’s low, I think that it is highly likely that we need at least one more leg to the price structure we are currently in when looking at the 195-min chart.

Whether that next move to a new lower low is the last leg of a corrective price structure that precedes a push up to new higher highs is yet to be seen.  I suspect that due to the strength/melt-up of the market into the January highs, we are going to need a bigger more complex price structure move lower … that is why I believe traders will see a 3-wave structure to this correction before it is all said and done.

Here is what I think traders should be preparing for …

Bullish Scenario – SPY 195 Minute Chart #1

The typical turning point for a corrective bounce is that 61.8% resistance level – $273.72.  The “C” wave of an ABC zigzag will typically terminate at around that 1.272x extension target, which would see the SPY get down to the $243.76 level.

Bearish Scenario – SPY 195 Minute Chart #2

So the near-term resistance zone for a bigger 3-wave corrective move in price is still at that 61.8% resistance level … Wave-2’s typically will terminate at the 1.618x extension target zone at around $232.12.  The final Wave-3 target zone would be down at the $220.99 level.

Bullish/Bearish Scenario – SPY 195 Minute Chart #3

In either of the bullish/bearish scenarios I depict above, price will need to find an interim resistance level here soon … the intra-day high so far today for the SPY is at $271.79, which is pretty close to the last pivot high of $272.36 and that 61.8% resistance level of $273.72.  Maybe we grind into that final resistance high on Friday which will then set up the next leg lower to begin next week.

Bottom Line – I believe the strength of the melt-up into the January highs, and the strength of the push lower last week will lead to at least a 2-wave structure lower into support.  Personally, I think a 3-wave structure is what is going to happen but I will be giving the more bullish scenario respect as we push into that $1.272x / $243.76 zone as well.

Cheers … Leaf_West

Daily Bull Flag Scan …

I’m not really looking for swing trades here in the current market, but I did look at my daily time frame bull flag scan results earlier today.  The best looking bull flag identified to me was for CHRW the $12.7 billion transport company.  Here is the bull-flag setting up on the daily chart …

CHRW – Daily Chart

You can see the nice little bull-flag set-up on the price chart … price is just underneath the 20SMA and its signal line so if price is going to break this flag pattern, it will also return to the bullish side of the moving averages.

The Relative Strength indicator on the right-side panel shows how well CHRW has held in during all of the selling in the market over the past week or so … impressive.

The last quarterly earnings report was released on January 30th and revenue was up 16.1% which was a nice little beat … earnings also beat expectations ($1.08 vs $0.84).  If the global economy is indeed accelerating as well as most pundits are saying, transports including CHRW should have the wind at their backs for the next several quarters.

CHRW – Weekly Chart

The weekly chart shows how price is still above the weekly ATR support level … the trend strength histogram is still in the extreme trend strength warning zone, and that is the only thing negative I can say about CHRW’s charts.  Normally, an extended weekly chart would turn me away from getting long a stock based on a daily chart pattern, but the monthly chart is not extended so I think that any consolidation on the weekly chart could end up being shorter in duration than normal and indeed may  be complete when this daily bull-flag pattern breaks to the upside.

CHRW – 195 Minute Chart

If the daily chart is going to break the bull-flag pattern higher, it will need to first break the 195-min ATR resistance level at $93.61 … I have an audio alert set there, and I will revisit this stock when/if that ATR level is taken out.

Cheers … Leaf_West