Today’s Trading Lesson…
Trading Reversal Days
Small moves in the stock market, often lead to big changes in order flow.
When the market changes direction, it commonly occurs with a reversal day pattern. A reversal day or candlestick happens in a downtrend when the market makes a lower low, than the previous day’s low, and then trades above the previous day’s low.
These are typically high volume days that can cause a shift in momentum. The pattern generally gets applied as an exit to a winning trade. Using the pattern for an entry is only smart when you are entering in the direction of order flow.
This is also known to chart readers as a “key reversal day.” In our Trading Mastery course we call this setup the “U-Turn” because one side of the market gets caught as prices reverse.
The most powerful U-Turns occur after a stock reaches a “Saturation point,” or an area we expect institutions to take profits.
On the Tape Today...
UNP | Union Pac Corp. showing an inside day after a gap to new highs on Thursday. A $109.25 buy-stop triggers a new long with a potential swing trade target to sell @ $117.50. Minor resistance @ $110, expecting a pause at this level and planning to add more shares. Stop loss on a close below $107.
GILD | Gilead Sciences broke the quadruple bottom support @ $72. This triggers a new sell-short with an ultimate target on a swing trade @ $63.50. The problem for a new short comes from the 11 consecutive closes below the open. Looking for a bear flag/pause @ the $71 level then a new sell short.
Stock Market Today: Heatmap of the S&P 500
Stock Market Today 1-23-17 | Monday Edition
Trump Mocks Protesters Before Affirming Right to Demonstrate
President Donald Trump mocked protesters who gathered for large demonstrations across the U.S. and the world on Saturday to signal discontent with his leadership, but later offered a more conciliatory tone, saying he recognized such marches as a “hallmark of our democracy.”
“Watched protests yesterday but was under impression that we just had an election! Why didn’t these people vote? Celebs hurt cause badly,” Trump said early Sunday in a Twitter post. It was his administration’s first direct response to the Women’s March on Washington and related events.
Apple’s Legal Assault on Qualcomm Is Part of Phone Margin Grab
Apple Inc. is piling onto lawsuits that attack the way Qualcomm Inc. licenses technology for mobile phones in a widespread effort to rake back profits in a slowing market.
The latest suit by Apple, filed Friday, alleges that Qualcomm has unfairly used the power of its patents, which cover the fundamentals of phone systems, and its chip business to prop up its dominant position in the industry. Apple’s legal actions follow regulatory investigations and fines on three continents, including a lawsuit announced last week by the U.S. Federal Trade Commission.
SEC probing Yahoo over previously disclosed cyber breach: filing
The U.S. Securities and Exchange Commission is investigating a previously disclosed data breach at Yahoo Inc (YHOO.O), the company said in a filing.
Yahoo said in a November 2016 quarterly filing that it was “cooperating with federal, state and foreign” agencies, including the SEC, that were seeking information and documents about a “security incident and related matters.”
Wall Street stocks set to slip as Trump keeps investors on the back foot
U.S. stock futures tilted south on Monday as global markets grappled with uncertainty over the policies of U.S. President Donald Trump and concerns he’ll pursue a protectionist agenda.
Investors were paring some risk, buying Japanese yen and driving the dollar lower. European equities and oil also fell. Earnings from Halliburton Co., McDonald’s Corp. and Yahoo Inc. later may also drive trading action.
Apollo’s New Guy Is a Legend in Banking But a Novice in Buyouts
Gary Parr had deals going in three parts of the world when he dropped the mic on a 30-year career as a banker.
While the career change drew skepticism from some former colleagues who wonder how much he knows about things like accumulating real estate and investing in debt, Davide Serra called the switch a “natural evolution” for the consummate banker. “It’s a step up,” said Serra, who worked at Morgan Stanley at the same time as Parr and went on to create hedge fund Algebris Investments.
Oil falls as signs of U.S. output rise overshadows OPEC-led cuts
Oil prices fell one percent on Monday as signs of a strong recovery in U.S. oil drilling activity outweighed news that OPEC and non-OPEC producers were on track to meet output reduction goals set in December.
Global benchmark Brent crude prices LCOc1 were down 53 cents to $54.96 a barrel at 1026 GMT, while U.S. West Texas Intermediate (WTI) crude futures CLc1 traded at $52.61 a barrel, down 61 cents, or 1.1 percent, on Friday’s close.
News Media, Target of Trump’s Declaration of War, Expresses Alarm
For wary Washington journalists, it seemed only a matter of time before Donald J. Trump’s presidency would lead to a high-tension standoff between his administration and the news media.
But on Day 1?
The news media world found itself in a state of shock on Sunday, a day after Mr. Trump declared himself in “a running war with the media” and the president’s press secretary, Sean Spicer, used his first appearance on the White House podium to deliver a fiery jeremiad against the press.
Trader Warns “Trump’s First Week Could Keep Markets Busy” – What To Watch
“May you live in interesting times,” really is a curse; and as Bloomberg’s Richard Breslow warns, “I doubt things are going to get any less gripping… Whatever else markets are pricing in, risk premiums appear to be too low.”
Drugmaker fined $100M for hiking price 85,000%
A drug maker was accused of slowly hiking the price of a life-saving medication used to treat infants from $40 a vial to more than $34,000 a vial, and preventing other pharmaceutical firms from creating a competitive drug.
The company, Mallinckrodt, agreed Wednesday to settle charges of anti-competitive practices by paying a $100 million fine and allow a competitor to produce a similar medication.
JP Morgan sees U.S. telecom sector consolidation, T-Mobile deal
U.S. telecom sector could be on the brink of a major consolidation under President Donald Trump’s likely more merger-friendly administration, said JP Morgan Securities, which now sees a 90 percent chance of T-Mobile US being involved in a strategic transaction in the next five years.
T-Mobile could be involved in tie-up with Sprint Corp, or be acquired by a cable company, JP Morgan said, adding that a transaction involving Dish Network Corp or a sale to a foreign player that wants a foothold in the U.S. wireless market is also likely.
Tape Reading the SPY ETF
$SPY hourly charts show the tight range and the levels we need to clear to expect follow through.
$225.50 to $227.50 gives us the reference points. The upside doesn’t have much room, and the short side trades against order flow. Not much meat on this bone right now.
The NASDAQ continues to remain well-bid, but also continues to close below the open price (last 2 days). Not the combination we want to get long with conviction.
So what do you trade? Look for earnings plays and pay attention for clusters of order flow within sectors. Such as the financials had for much of November and December. Retail to the short side an example in the current tape.
McDonald’s Q4 Earnings Report: Unlikely To Be A Major Positive Catalyst
“We anticipate satisfactory Q4 results against a difficult comparison, and we believe stronger momentum can emerge once McDonald’s Corporation MCD gets past another challenging hurdle in Q1-17,” Baird’s David E. Tarantino said in a note, while maintaining an Outperform rating on the company.
McDonald’s Q4 Earnings Coming Up: What to Expect (MCD)
Fast food giant McDonald’s Corporation (MCD) will report fourth quarter fiscal 2016 earnings results before the opening bell Monday.
As evidenced by the recent decline in analysts’ fourth quarter estimates – many of whom cited the harsh winter weather as the culprit – McDonald’s top- and bottom-line results could underwhelm. And that’s hardly what investors want to hear from a stock that’s no longer on the value menu.
McDonald’s: Earnings Vs. The Turnaround Story
McDonald’s (NYSE:MCD) reports earnings to kick off markets (NYSEARCA:SPY) next week, and investors will be looking for clues as to a read on the global consumer, and economy.
Revenue growth for the fast-food behemoth has slipped in recent years as trends shifted towards healthier fast-casual locations. But when Steve Easterbrook took over in March of 2015, the company experienced a turnaround as refranchising efforts took hold.
Stocks to Trade 1-23-17 | Monday Edition
Short-Term Trading Momentum:
Bullish Momentum: SWKS, KSU, CC, CLVS
Bearish Momentum: sm, wba, qcom, mnk, bmy
Quarterly Order Flow:
Bullish Stocks to Trade: AVGO, SLCA, ADSK, CLVS, PNC, WDC, ADBE, TSLA, COST, KMX, TRGP, NFLX, BABA, FB
Bearish Stocks to Trade: bmy, mnk, tgt, gild, twlo, oxy, dg, kssm, xom, jwn
2x Normal Volume: BMY, CSX, MRK, QCOM, SWKS, TGT, IBM, WBA, AVGO, KSU
Inside days: csx, xom, jpm, x, ms, wu, nke, dow, unp, nem, dis, low, dhi, crm, bbt, jblu, tsla, syy, bx, unh, kss, nwl, dd, utx, amgn, stx, vlo, ups, urbn, wynn