July 16, 2020 - MDT Pro Tips

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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.

I mentioned in yesterday's update that I would be looking to close the short term QQQ debit spread and that is what you should have done.

The bullish gap open gave us a great place to close out the trade overnight with a return of 80%.

The result was an overnight return of 80%.

There are two positions that expire tomorrow.

Both are short calls. The first is the short $15 call on PRA. PRA is above the strike price and the calls should most likely be assigned. This will result in booking the profit on the calls and the stock on the assignment.

The second is the short $17 call on DXC. DXC is under the strike price.

I will issue alerts if the positions need to be adjusted.

The S & P 500 followed through yesterday from the reversal on Tuesday. The day closed out 29.04 points higher.

The S & P closed at 3,226.56.

This was the second consecutive close above the minor 3,164 level.

Based on this price action, the upside objective for the S & P should now be to the major 3,281.20 level.

And support should be at the minor 3,164 level.

I do have a few comments about yesterday's price action.

The S & P gapped 28.46 points higher at the open. The gap was almost 50% of the daily average true range, which is 59.49.

After the gap, the market ran up to a high of 3,238.28, before reversing. The high was about 4 points below the next minor level of 3,242.15.

After topping out, the S & P sold off to fill the gap, hitting a low of 3,200.76.

Tuesdays high was 3,200.95, so the market filled the entire gap.

Usually, these extreme gaps are no sustainable, and fading them makes sense.

This is one of the reasons I suggested closing the QQQ call spread. That and the fact that the QQQ is trading right at the upper band on the daily chart.

The intraday range for the S & P was only 37.52 points. With the daily average true range now at 59.49, this was a contraction of 63%.

So this does suggest we will see an expansion.

And pre open, the S & P is trading about 20 points lower. This would project to an open around 3,206 or about 6 points above yesterdays low.

Watch to see if the low holds as support. If it can't, I would expect the market to head lower.

Also, the resistance level from yesterday should be in the 3,220 area.

This afternoon, after the close, we get earnings from NFLX.

Here are the Key Levels for the Markets:

$VIX:

Major level: 37.50
Minor level: 36.72
Minor level: 35.16
Major level: 34.38
Minor level: 33.60
Minor level: 32.03 **
Major level: 31.25
Minor level: 30.47 **
Minor level: 28.91
Major level: 28.13 Hit
Minor level: 27.35
Minor level: 25.78
Major level: 25.00
Minor level: 24.22

The VIX closed at 27.76, down 1.76 on the day.

The VIX not only hit the 28.13 objective, it close under it. At this point, 28.91 should be resistance.

And the VIX will need two closes under 27.35 to head lower.

This also put the VIX under 30.13, which is the midband on the 60 minute chart. This level should now be resistance.

S & P 500:

Major level: 3,281.20 <
Minor level: 3,242.15
Minor level: 3,164.00 **
Major level: 3,125.00 < Hit
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80
Minor level: 2,929.75
Minor level: 2,851.65
Major level: 2,812.50
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30

The S & P closed at 3,226.56. With a close yesterday above 3,164, the S & P should head up to 3,281.

Support should be at 3,164. And minor support is at 3,203.

Technical support is around 3,200.

QQQ:

Major level: 268.75
Minor level: 267.18
Minor level: 264.05
Major level: 262.50 Hit
Minor level: 260.93 **
Minor level: 257.80 <
Major level: 256.25
Minor level: 254.69
Minor level: 251.56
Major level: 250.00
Minor level: 248.54
Minor level: 245.31
Major level: 243.75

The QQQ closed at 260.90. The QQQ got as high as 262.69 before closing below the major 262.50 level.

So, yesterday, the QQQ hit the major 262.50 level again and failed to close above the upper band on the daily chart.

The upper band is now 262.40, which is within 10 cents of the major level.

With a close under the upper band, I would expect more selling in the QQQ. And pre open, the QQQ is trading about 3 points lower.

Watch the minor 257.80 level, which I would expect support to be. And technical support is also around 258.

Also, the minor 260.93 level is a key level because two closes under this level and the QQQ should drop.

IWM:

Major level: 156.25
Minor level: 154.70
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
Minor level: 145.31 ***
Major level: 143.75 < Hit
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
Major level: 131.25

The IWM closed at 147.03. The IWM blew through the 143.75 target we were looking for and closed right at the midband.

The midband is 146.07 and is now the key level to watch. That and the minor 145.31 level. A close above 145.31 and the IWM should test 150.

So, you have a few key things happening at the moment. Best to step aside and wait to see what confirms.

Technical resistance is now around 141, and the IWM closed just above it.
Short term the IWM is overbought, so a pullback here would be a shock.

TLT:

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
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

The TLT closed at 166.34. The TLT pulled back as expected.

If the TLT can close above 166.41, it should make another push higher.

165.63 should now be support. Watch this level. A break under
his level and the TLT should head lower.

167 is a minor technical support level. A break under this and the TLT should head lower.

GLD:

Major level: 171.89
Minor level: 171.11
Minor level: 169.54 **
Major level: 168.75 < HIT
Minor level: 167.98
Minor level: 166.41
Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50
Minor level: 161.72
Minor level: 160.16

The GLD closed at 170.34. The objective for the GLD should still be up to 171.89.

The minor 167.98 level should be support. And 168.75 should also be support.

Technical support should still be at 169.

XLE:

Minor level: 44.53
Major level: 43.75
Minor level: 42.97
Minor level: 41.41
Major level: 40.63
Minor level: 39.83
Minor level: 38.28 **
Major level: 37.50 Target - HIT
Minor level: 36.72 **
Minor level: 35.15
Major level: 34.37
Minor level: 33.59
Minor level: 32.03
Major level: 31.25

The XLE closed at 37.38 The objective for the XLE should still be to 37.50. And the XLE hit the objective yesterday, with a high of 37.62.

At this point, the minor 36.72 level should be support. A break under this level and the XLE should drop. If it clears 38.28 on the upside, then it should head higher.

And technical resistance is still around 39.

AAPL:

Major level: 400.00
Minor level: 396.88
Minor level: 390.63 **
Major level: 387.50 < Hit
Minor level: 384.38 **
Minor level: 378.13
Major level: 375.00
Minor level: 371.88
Minor level: 365.63
Major level: 362.50
Minor level: 359.38
Minor level: 353.13
Major level: 350.00
Minor level: 346.88

Apple closed at 390.90. Apple closed 2.67 higher on the day.

Apple is back above the major 387.50 level. The next minor level is 390.63. And a close today above this level and Apple should run to 400.

However, Apple is right at the upper band on the daily chart. That level is 399.98. This sets up a few price expectations.

And technical support is around 388.

WATCH LIST:

Bullish Stocks: AMZN, TSLA, GOOGL, SHOP, REGN, NFLX, NTES, ADBE, DXCM, NVDA, DPZ, AAPL, LRCX, COUP, VRTX, WIX

Bearish Stocks: ORLY, LMT, MA, NOC, CTAS, ULTA, MCD, BURL, SYK, MMM, AAP, ZBH, IBM, HS, CVXADS, FTDR, FANG, DIN, AJRD, FUN, HFC