Last week the market started out strong, and to sum it up, finished mixed if not a bit weaker in the NASDAQ 100 (NDX), states John Person of PersonsPlanet.com.
Most stock sectors underwent wild price swings such as metals, energy, industrials such as GE and DE. Even Bitcoin, which gained 15.81% last week had extreme intraday volatility. We also had a mixed reading in the breadth indicators, all were positive except the QQQ’s. All in all, most sectors showed good contribution to this rally.
As I stated last week the market is rich, it's vulnerable to flip on a dime. Volume trends are very light, if and when we are to see a deep correction develop, one key technical observation I would watch for is to see if the daily close is beneath both daily and weekly pivot values. A traditional sell signal, besides a daily & weekly PPS price-based sell signal, would be if we get a daily close below weekly pivot and a stronger sell signal would be when the daily pivots are beneath weekly pivot, and the market has had a daily close beneath both values. Combine that with a weakening OBV volume trend and weakening breadth readings.
As of Friday, the SPY, IWM, and the QQQ did form a daily and weekly close below their respective weekly pivot levels, but not the NYSE and the DIA, they remained above pivot. Plus, the volume and breadth reading were not signaling a disastrous sell-off yet. That does not mean we cannot undergo a rotational correction, which is what my outlook is calling for. As of Friday, most of the major averages are trading at or near respective Monthly Persons Pivot Resistance levels therefore we may see a consolidation trading range develop rather than a full-blown breakdown.
This week: we have a heavy calendar of events with economic numbers and earnings reports, plus Jerome Powell testifies on Capitol Hill. We have numerous buys as it seems the major averages are taking the form of a rotational correction. As an example, I saw Apple, Amazon, and Facebook declining where energy, building, agricultural stocks, financials, and numerous discretionary sub-sectors simply reversed course and moved higher last week. With that said I will be buying back the 55 strike call in Walgreens from the collar strategy for those who have not already done so.
As for new shorting opportunities we did see numerous big high-profile names populate solid sell signals (AAPL, APRN, ANET, CVS, KDP, LLY, MCK, NIO, NFLX, PHM, SWCH, TGT, TTWO) however, I would wait to see if we have any follow through weakness from Monday into Tuesday mid-day, and unless volume picks up on the down days then I suspect it may be a shallow pullback in those names.
Per my rotational theme and weekly scan results, I am getting into the following new trades as shown in the table below. We have positions on in energy names and a regional bank (TFC) as I have shared in past articles, howeve,r for full transparency here are my stock picks entry levels, stops and target levels. This is the research I provide to clients each week, as well as the discussion held in both our live automated algo trade room and stock option trade room.
- Option Strategy: Valero Energy (VLO) March 19th exp. 65/75 Bull Call spread, paid 1.90.
- Long full position in Junior Gold Miners (GDXJ) 41.46 using April 16th Exp. 42 strike Put in lieu of stop paid 1.05.
- Long full position in Walgreens (WBA) 39.22 using March 19th Exp. 45 Put from Collar in lieu of stop.
- Long 50% position in Marathon Pet. Corp. (MPC) at 36.58, stops raised to 47.21.
- Long 50% position in Truist Financial (TFC) at 48.54, stops raised to 51.19.
All the best and remember this is the last week of February. As we enter March, remember the saying, in like a lion out like a lamb and beware of the Ides of March.
To learn more about John Person, please visit PersonsPlanet.com.