February 20, 2018 - MDT Pro Tips A.M.

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

CURRENT POSITIONS:

GOGO Long at $19.93
Total Premium Collected $1.95

ASNA Long at $14.20
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DUST Long $4.50
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SNAP Long at $15.20
Premium Collected - $3.55

AMC Long at $15.27
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UNIT Long at $17.00
Premium Collected - $0.35

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After two weeks of increased volatility, the market bounced last week and closed to the upside.

Since topping out at 2,872.87 on January 26th, the S & P 500 dropped to a low of 2,532.69 on February 9th.

The sell off was 340.18 points in only eleven days. On a percentage basis, the drop was 11.8% in that span.

I mentioned in the write up I sent out on the 15th, that the market had two selling climaxes. I was actually wrong.

There were three climaxes during the sell off. The first one was on February 2nd, when the down to up volume read 13.61. The second one was on the 5th, when the reading was a staggering 30.91.

And the final one was on the 8th, when the down to up volume was 11.46.

Usually one climax can turn the market, so multiple climaxes should be even more predictive.

Then the question becomes how can you take advantage of the bounce?

A simply way to do it is to look at stocks that have fallen below their lower extreme bollinger band on their 60 minute charts. In fact, on tomorrow's webinar, I will show a few examples.

But, you have to see a few selling climaxes before you begin testing the longside. I don't think I have ever seen the market not bounce after a selling climax, let alone multiple ones.

The question now is what should be the price expectation this week?

The S & P 500 rallied right back up to the midband on its 60 minute chart Friday, and could not get through it. Also, the 60 minute chart has crossed into a downtrend.

This is the key level to watch at the moment. That level is now 2,748.54. A failure to clear this level and the S & P 500 should test the lower band, which is 2,565.53.

The VIX should help guide us to determine if this is the next move.

Friday, the VIX closed at 19.46, just under the upper band on the its daily chart. The upper band is 20.85, so it closed just under it.

For the market to continue down, the VIX should continue higher. A break above the upper band would tell us the market should head down.

Last week, the S & P 500 formed an inside week price. This can lead to a range expansion.

The support level from last week's price bar is in the 2,684 to 2,688 area.

Here are the Key Levels for the Markets:

$VIX:

Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00
Minor level: 23.44
Minor level: 20.31 <
Major level: 18.75
Minor level: 17.19
Minor level: 14.06
Major level: 12.50
Minor level: 10.94

The VIX closed at 19.46. To move higher, the VIX will need two closes above 20.31.

Also, watch to see if the VIX can reclaim the upper band on the daily chart, which is 20.85.

On the downside, the key level remains at 18.75. Two closes under 18.85 and the VIX should drop back to 12.50.

$SPX:

Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40 <
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30
Minor level: 2,636.75

The S & P 500 was able to get above the major 2,734.40 level on Friday, but failed to close above. Watch for this level to be tested again. A failure here and the market could drop.

2,695.30 is a short term support level.

QQQ:

Major level: 175.00
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
Minor level: 167.19
Minor level: 164.06 **
Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25

The QQQ closed at 164.96. The 168.75 level should be tested. Unlike the S & P 500, it did clear the midband on the 60 minute chart. So, that level should now be support.

That level is 163.25. Watch to see if it holds. And the minor support level is at 162.50.

IWM:

Major level: 162.50
Minor level: 161.72
Minor level: 160.16
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.47 **
Minor level: 153.91
Major level: 153.13 <
Minor level: 152.35

The IWM closed at 153.34. Watch the 153.13 level. The IWM will need to hold 153.13 to get higher.

Support is at the 150 level.

TLT:

Major level: 121.88
Minor level: 121.49
Minor level: 120.70
Major level: 120.31
Minor level: 119.92 **
Minor level: 119.14
Major level: 118.75
Minor level: 118.36
Minor level: 117.58
Major level: 117.19

The TLT closed at 118.71. The TLT is oversold and a bounce should be expected.

Two closes above 119.14 and the TLT should test 120.31. On the downside, if the TLT breaks under 117.19, it should head lower.

GLD:

Major level: 131.25
Minor level: 130.47
Minor level: 128.91
Major level: 128.13 <
Minor level: 127.35
Minor level: 125.78
Major level: 125.00
Minor level: 124.22
Minor level: 122.66

The GLD closed at 127.96. The GLD is testing the 128.13 level. A break here and the GLD should drop to 125.

If the GLD can clear 128.13, it should head higher.

129.34 is the upper band on the daily chart.

XLE:

Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
Major level: 75.00
Minor level: 74.22
Minor level: 72.66
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75 <
Minor level: 67.97
Minor level: 66.41
Major level: 65.63 <

The XLE closed at 68.12. The 65.63 level should offer suppor on a retest.

To move higher, the XLE will need two closes above 69.53. To move lower, two closes under 67.97.

FXY:

Major level: 89.06
Minor level: 88.87
Minor level: 88.48
Major level: 88.28 <
Minor level: 88.09 **
Minor level: 87.70
Major level: 87.50
Minor level: 87.31
Minor level: 86.92
Major level: 86.72
Minor level: 86.53

The FXY closed at 90.22. The FXY is trading above its upper band on its daily chart, which is 89.55.

Watch the 90.63 level. The FXY should test this level. If it cannot clear 90.63, it should pullback.

AAPL:

Major level: 175.00
Minor level: 174.22
Minor level: 172.66
Major level: 171.88 <
Minor level: 171.10
Minor level: 169.53
Major level: 168.75
Minor level: 167.97
Minor level: 166.41
Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50

Apple closed at 172.43. Look for a test of 175. 160.20 to 169.68 should offer support.

The 166 area should be strong support from last week's weekly price bar.

WATCH LIST:

Bullish Stocks: LMT, BA, RTN, MA, CME, PANW, FFIV, RHT, ATHN, WDAY, EW, DATA, SFLY, TPR

Bearish Stocks: ULTA, AAP, EXPE, THS, CTB, PDCO, MXL, SKT, GOV

Be sure to check earnings release dates.