Sunday, August 30, 2015

My Secondary Watch List: $NKE $UHS $V $SBUX $CMG $FL $STZ $GOOGL $AMZN

20% Price Swings on $QQQ


Last Monday we witnessed a sheer panic in the market.  One of the major index - $QQQ - that I monitor, had a price swing of 20% that day. The two sectors that have been leading this year (Technology $XLK and Health Care $XLV) also had a similar price swings on Monday. Traders on the floor were letting their emotional instincts of greed, fear, hope and pride get in their way of making sound decisions based on the market data. 

Retail investors were caught completely off guard too and they were quickly liquidating their positions as well. This is what volatility looks like. There was extreme volume in trading that day. The last time we had such a high volume on the $QQQ or the $SPY was on Sept 22nd 2011. Market was in correction at that time too and was trading below the 200 simple moving average (SMA), just as it was last Monday. 

The Market is Predictable


One thing I have learnt from trading the markets is that market is made up of individuals like myself all over the world. Market is predictable because human behavior is predictable. It doesn't matter if you are a part of an institution such a hedge fund, pension fund or a mutual fund. There are individuals like myself that actually execute buy and sell orders. 

We may all use technology and programming algorithms on the computer to aid us in accomplishing our tasks in the market but there is always a human being that actually does this task. 

Lessons From Market History


Currently, most liquid and transparent stock markets of the world such as Australia, Germany, France, Hong Kong, Brazil, Korea, Japan, Mexico, Italy, Spain, Russia, India, Canada - just to name a few - are hovering below their 200 simple day moving average (sma) Our US market is also hovering below the 200 sma. 

Is this a coincidence?  The price of oil has plummeted by 65% since June of 2014 as well as the price of copper, iron ore, gold and silver has been on a downward trajectory. There is a lack of demand for products all over the world. Savings from low price of oil has not resulted in consumers spending that saving. They are instead saving that money or utilizing it to spruce up their homes.

Looking over the historical aspects of the market, I notice that since the lows on Sept 22nd of 2011, $SPY rocketed up by 9% within 4 weeks. A similar thing happened on October 16th of 2014 when the $SPY bounced up by 10% within 4 weeks as well. We have had a very similar rally in the market 4 days last week with a very similar volume on the $SPY. I am fully prepared this week with a primary list of 6 stocks that are poised to lead the market. This list is available to subscribers of my watch list service.

There are other stocks on my secondary watch list as well that I am looking for conservative option strategies, if the market resumes its uptrend this week. Some of those stocks are:

$NKE
$UHS
$V
$SBUX
$CMG
$FL
$STZ
$GOOGL
$AMZN 

As always, I look to the Asian and Australian markets on Sunday night before I go to bed. They set the initial tone for us in the US markets. If the market resumes its uptrend this week than it is best to take only a very small position initially. 

Happy trading!















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