Here is the strategy I laid out for subscribers to start the week:
The market is overbought, so entry is not optimal until we get a pullback to support. At that level, one could enter SPY or SSO for extra leverage.
If by chance the market continues to ramp up, we can take another stab at the oversold bounce or rubber band trade. If SPY bounces close to $100, I’ll look to take a quick short trade with a tight stop.
I was stopped out of the X trade on Friday.
A few specific short setups with triggers:
Some stocks are showing extreme overbought conditions and setup as “rubber band” short setups on a bounce.
AAPL is stretched about as much as it has been over the past year. Notice that it is piercing the bollinger band and showing extreme overbought conidtions. It’s not just oversold, it’s extremely oversold. If it bounces again tomorrow ($162-165), I’ll look to get short. Only on bounce, which would make a pullback almost inevitable.
SRS is an inverse ETF. While it is a bearish trade, we have to look at it as if we are going long. As with AAPL, it is at extreme levels, but I’d like it to get more extreme. A dip tomorrow to around $16-$16.25 and I will enter.
AMZN is a “failed breakout” trade. The stock broke out of major resistance with a huge price bar and major volume, only to breakdown the following day in equally powerful fashion. I will look to short on strength tomorrow. Stop should be around $91. Low risk, high reward.
Remember that the market is overbought so I’d like to wait a few days for most long entries. Here is my watchlist:
breakout-pullback candidates: SBUX, NFX, POOL, TXI, ALB, ISRG, CELG
Hot stocks showing accumulation (many commodities): BHP, PCU, NOV, RIG, FCX, ACI, GRMN, RL
Hot sector: Solars are looking really good in terms of price and accumulation. They can turn on a dime and are volatile, but I’d like to take a position on pullback of one of the following: SOLF, SOL, CSIQ or FSLR.