Today’s Trading Lesson | 7-21-16
How to Manage Trades Correctly
Visualize the numbers one through six. Now think about a stock you bought.
During the previous six days, was it closer to one or six? Was it the first green candlestick or the sixth?
Now imagine six is the end of the line, then end of “normal’ momentum for any stock. Six consecutive days of momentum. What would you expect to happen on day five or six? Would you manage the same as day one or two?
Early in the six day cycle, days one through three, you can expect follow through. Days four through six, the odds of follow through diminishes, especially days five and six.
Sounds great, but how does that help you manage trades?
One of the biggest mistakes I see is adding to every position. This mindset causes many profitable trades to become “flats.” Winning trades that become ulcers.
The truth is, some trades deserve more shares, some don’t. I call this building a position, versus cash flow. Days 1-3 look to add shares and hold longer. Days 4-6 trade the current momentum.
Days 1-3 add during a pause, days 4-6 exit during a pause (on your entry time frame.)
Think about how powerful this concept is. You will know your trade management before you enter the trade. This eliminates all of the guess-work from trade management.
Once you spot this cycle on the daily charts, you will manage trades like a pro.
On the Tape Today...
$HD breakout over $136 is nine months in the making. (see chart)
$PSX continues to show relative weakness. $74 and $70 are the short sale targets.
$FB finally cleared $121. Maybe one more day trade but then it needs to pause above that level for a new long.
$YHOO getting beat up in the news but earnings pushed it through the $38 resistance. Worth a look.
$HD 7-21-16 (Click to Enlarge)
Dow on track to snap its win streak with flood of earnings, data ahead
U.S. stock futures on Thursday pointed to a small drop at open, putting the Dow industrials on track to fall for the first time in nine sessions.
Investors are waiting for an update from the European Central Bank, and for a big dose of U.S. economic data and earnings reports.
Tesla Motors Inc. TSLA, +0.57% and SolarCity Corp. SCTY, +2.63% gained 0.4% and 1.7%, respectively, in premarket action after Tesla CEO Elon Musk laid out a “master plan” for a combination of the two companies.
Earnings ahead: Several corporate financial updates are expected Thursday.
Coffee and donuts seller Dunkin’ Brands Group Inc. DNKN, +1.14% , satellite TV provider Dish Network Corp. DISH, -0.23% , Southwest Airlines Co. LUV, -1.62% , insurer Travelers Cos. Inc. TRV, -0.03% , Domino’s Pizza Inc. DPZ, +0.99% and General Motors Co. GM, +1.62% are on the docket before the open.
After the market’s close, Chipotle Mexican Grill Inc. CMG, +1.05% , AT&T Inc. T, -0.14% , Starbucks Corp. SBUX, +1.37% , Visa Inc. V, +0.81% and streaming music service Pandora Media Inc. P, -1.20% are expected to grab the spotlightRead More — >>
Stock Market Today: Heatmap of the S&P 500
Stock Trading Today 7-21-16 | $SBUX Earnings
Microsoft Sends Dow To 9th Win; eBay, Intel, Mattel Move After Hours
Stocks rallied Wednesday, fueled by strong earnings reports, leading the S&P 500 and Dow to fresh all-time highs. Microsoft (MSFT) led blue chips with a 5% jump.
The Nasdaq scored a 1.1% gain, thanks also to big moves by Facebook (FB) and Intuitive Surgical (ISRG). The tech-heavy index closed at its best level in nearly seven months. The S&P 500 followed with a 0.4% advance, while the Dow Jones industrial average added 0.2%. Volume was higher across the board vs. Tuesday, according to preliminary data.
Leisure, software and medical-related stocks taking the lead in the stock market today. Gold miners, food and steel stocks lagged. Gold futures fell 1.3% to $1,315.20 an ounce, while West Texas intermediate oil climbed 0.5% to $44.85 per barrel.
After hours, eBay (EBAY) jumped sharply as the online marketplace posted upside Q2 surprises on both the top and bottom lines, and raised its full-year guidance. It rose 2% in the regular session.Read More — >>
Tape Reading the SPY ETF
$SPY continues to trade higher on putrid volume. (only 58 million shares yesterday)
You could say there are no new buyers, but short sellers aren’t ready to test the waters either. With earnings in full swing, and breakouts galore, the tape stills says be long, but with less shares.
Stocks in Play: $SBUX research on finviz.com
$SBUX NEWS: What to expect from Starbucks earnings
Starbucks’ recent announcements have focused on food and expansion abroad…
Starbucks Corp. is expected to report third-quarter earnings on Thursday after the bell.
Same-store sales will be a focus following a second quarter in which same-store sales growth was 6% globally.
The coffee giant has also recently made announcements, including a partnership with a luxury Italian bakery, Princi, and an expanded agreement with Tata Sons Limited that will include the introduction of a coffee from India, that indicate the company is thinking about new products and new geographies for the future.
Here’s what to expect:
Earnings: Analysts polled by FactSet and Estimize, a software platform that gathers estimates from buy-side analysts, hedge-fund managers, academics, and others, expect earnings of 49 cents per share. That’s an increase from 42 cents per share for the same period last year.Read More — >>
Stocks to Trade 7-21-16 | Thursday Edition
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: SRPT, RH, MYL, ETP, SLCA, SCTY, CMW, PCAR, HOG, CLR, LNG
Negative last 20 and 5 trading days | closed 2% lower from the open: rrc
Quarterly Order Flow:
Bullish Stocks to Trade: SLCA, VMW, LRCX, CHRE, SHPG, CLR, WDC, IBM, FB, SLB, AMZN, AMGN>$165, YUM, MBLY, HD, UNH, UNP, BA, CAST, CAT
Bearish Stocks to Trade: nflx, psx, bidu
2x Normal Volume: K, MSFT, RMH
Inside days: abbv, mrk, wba, ibm, phm, bmy, mat, stx, bidu, esrx, aet, tsn, mon, ba, bby, ip, ions, kors