July 27, 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
Total Premium Collected $0.75

DUST Long $4.50
Total Premium Collected $0.70

SNAP Long at $14.54
Premium Collected - $1.65

BERY Long Sept $50.00 Call at $2.70

OI Long Nov $17 Call for $1.25
OI Short Nov $20 Call for $0.35

VALE Long at $13.50
VALE Short July 27th - 13.50 Call at $0.21

FEYE Long at $16.69
FEYE Short July 27th - $17.00 Call at $0.25

.......................................................................................... 

Before I begin, I need to mention that we have two positions that expire today.  The first is the short $13.50 call on VALE.  VALE closed out yesterday above the strike price, so it appears highly probably the calls will be assigned.

Leave the calls alone and if they are assigned, you will book your profit today.

The second position is the short $17 call on FEYE.  FEYE is actually trading right where we bought, so it is just under the strike.

Leave these calls alone as well and we will see where FEYE settles this afternoon.  If the calls are not assigned, I will suggest you sell another round of calls for next week.

Yesterday the market paused after the big breakout from Wednesday.  Perhaps it was the drubbing that Facebook took.  As you know, FB reported and dropped 18.96%.

The S & P 500 closed at 2,837.44, down 8.63 points for the day.

And the daily price bar formed a narrow range inside bar.  The range for the day was only 10.31 points.

So, for the day, market contracted.  The average true range is 20.60 points, so yesterday's range was about one half the average. 

If the market contracts again today, I would expect a breakout higher next week.

The weekly price bar has a high of 2,848.03 and a low of 2,795.14.  The midpoint so far is 2,821. Yesterday closed above it and if it can close above it today, it would indicate that the market should continue higher.

The weekly average true range is 60.38. If we add that to this week's low it projects to a high of 2,855.  Of course there is no guarantee that the market will move the average, but it does give an idea of where the S & P 500 could go today.

Support from yesterday's daily price is in the 2,836 to 2,840 area.

Yesterday's low came in at 2,835.26, which was virtually on the minor  2,835.70 support level I mentioned in yesterday's update. Its nice to know in advance where the market could possibly reverse.

In yesterday's update I asked this simple question ... "What is more important when trading the markets.  Having a correct directional bias or knowing how to predict when an expansion should occur?"

Perhaps you thought about the answer.

To me trading an expansion can be just as viable as trading directionally.

When you expect an expansion, you can trade using a straddle or strangle.  You are really not concerned if the stock or market moves higher or lower. Just that it moves.

Pre open, the S & P 500 is trading about 1 point lower. Follow the support levels below and the support I mentioned above from yesterday's daily bar.

Continue to monitor the longer term levels for the market.

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 12.14.  Yesterday's high was 12.53, about 3 cents above the major 12.50 level.  

The VIX is now right back to the level we were looking for.  And it is a major long term support level.  

With a close under 12.30, I would now expect the VIX to continue down to 11.72.

On the upside minor resistance is still at 12.70 and now 12.50.

SPX: 

Major level: 2,890.60
Minor level: 2,878.40
Minor level: 2,854.00 **
Major level: 2,841.80 <
Minor level: 2,829.60
Minor level: 2,805.20 
Major level: 2,793.00 
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10

On the upside, the S & P 500 needs to clear the 2,846.70 level.  It has offered resistance for the past two days. resistance is at 2,854.00. 

Support should be at 2,822.30.  And the minor 2,829.60 should also offer support.

QQQ:  

Major level: 187.50
Minor level: 185.94
Minor level: 182.81 **
Major level: 181.25 <
Minor level: 179.69 
Minor level: 176.56 
Major level: 175.00 
Minor level: 173.44 
Minor level: 170.31 
Major level: 168.75 

The QQQ closed at 180.05.  Minor support should be at 179.69.

If the QQQ can clear 181.25 it should head higher.

IWM:

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 

The IWM closed at 168.40. Short term support is at 167.97.  If this level holds, I would expect the IWM to get back above 168.75.

The midband on the 30 minute held as support.

TLT:  

Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 
Minor level: 121.49 
Minor level: 120.70 
Major level: 120.31 
Minor level: 119.92 **
Minor level: 119.14 
Major level: 118.75 

The TLT closed at 119.26.  The TLT is inching dowm the 118.75 objective and yesterday's low came within 41 cents of it.

119.92 should be minor resistance.

If the TLT can drop under 119.14, it should head down to 118.75.

GLD:  

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 <
Minor level: 116.80
Minor level: 116.02 **
Major level: 115.63 

The GLD closed at 115.77.  By failing to close above 116.02, the GLD will now need two closes above that level to move higher.

A break under the 115.63 level and the GLD should continue lower. 

On the upside, 116.21 should be minor resistance.

XLE: 

Major level: 78.13 <
Minor level: 77.35 
Minor level: 75.78 **
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

The XLE closed at 76.96,  above the minor 75.78 level.  This now implies that the XLE should move up to 78.13.

Support should be at 76.17.  And minor resistance is at 77.34.

FXY:

Major level: 86.72 
Minor level: 86.53 
Minor level: 86.14
Major level: 85.94 **
Minor level: 85.75 
Minor level: 85.36
Major level: 85.16 
Minor level: 84.97 
Minor level: 84.58
Major level: 84.38 

The FXY closed at 86.01.  At this point, 86.14 should be resistance.

The FXY could clear the 86.14 minor support level.  

85.94 should offer support. If the FXY breaks under 85.94, it should continue lower.

AAPL:

Major level: 200.00
Minor level: 198.44
Minor level: 195.31
Major level: 193.75 <
Minor level: 192.19 **
Minor level: 189.06 
Major level: 187.50 
Minor level: 186.72
Minor level: 185.16 
Major level: 184.38 

Apple closed at 194.21.  The 193.75 objective was taken out.

193.75 should now offer support.  195.31 could offer some resistance.  So, if Apple takes out 195.31, look for it to head higher. 

The 60 minute chart crossed over into an uptrend yesterday.  This implies that Apple should continue higher.

WATCH LIST:

Bullish Stocks: GWW, HUM, COST, FB, SNA, IBM, V, EW, CRI, DIS, GRUB, DATA, DXCM, SQ, DNKN

Bearish Stocks: TSLA, NXPI, SMG, BG, CAH, CTRP, EBAY, TSRO

Be sure to check earnings release dates.