Monday Market Spotlight: $MNST $ULTA $NCLH

Did You Take 1 On The Chin?

Last week was a disaster in all 3 major indices, but the worst pain was totally avoidable. If you were hyper focused on profit targets then you were probably in serious trouble when the closing bell struck on Friday.  The SPY, DJX, and QQQ each took a nose dive to the 50 day simple moving average (SMA) which was one of the biggest red flags for the coming technical correction.  

I closed out all of my losing positions by Tuesday so thankfully I'm riding above the 34 day exponential moving average (EMA).  You might be wondering how I avoided becoming part of the collateral damage?  Well, my routine forces me to map the "worst case scenario" possibility prior to placing any of my trades.  When the data starts streaming in, I match it against my trade plan - and execute immediately if I've dipped below my loss threshold.

What To Expect This Week

With Good Friday, we'll have a short week and, historically, trading volume during these short weeks tends to be light and a bit muted. Last week gave us a taste of what I believe we are about to experience throughout 2015. With the major indices hovering right around the 50 SMA, there hasn't really been any substantial progress.  Thanks to last weeks events, we are right where we were on Dec 30. 

Traditionally in the last 50 years, SPY has delivered over 2.25% on an average from Jan to March.  Monday is the last day of the quarter and it is likely that the market could bounce off the 50 day SMA but there's no telling which direction that will be. We'll have to wait and see how the Asian markets react to last weeks events.

What's On The Horizon?

When the market is in a "confirmed uptrend” it's typically a safe bet to focus on IBD® growth stocks but that's not the case right now.  We are facing 14 total distribution days and they have only been accumulated in the last 30 days. That is a serious sign of trouble and the situation becomes severe if we see just one more distribution day in the market. 

Now more than ever, it's crucial to have a disciplined approach to trading.  For me, it starts with utilizing my option strategy to establish a low risk trade.  In the current environment, that's an absolute must for me.  I am only looking at stocks that survived what happened last week. Also, I am only considering positions in the Health Care or Consumer Discretionary sectors.  Beyond that, I only look at stocks that are trading above the 34 day EMA. There aren't many that make it through that crucible but here are 3 that did:

$MNST
$ULTA
$NCLH


I give myself every opportunity to profit by taking positions that have a higher likelihood of going my way. I always plan my exit for profit but I have a plan for a loss too. I try to be robotic in nature and immediately execute what my plan called for.  

I highly recommend looking back my recent 3 part blog series on trade planning to help stay up to speed. Feel free to download the PDF checklist provided and use that as a guide in your own trade planning. I keep my own check list next to my computer as a constant reminder.

Starting this Wednesday I'll break down the art of building a stock Watch List in a 5 part series so watch for that!

Amin

investorspotlight@gmail.com