May 22, 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.

Yesterday, I suggested booking the profit on the AMN position. In two days, we were able to capture just over 50% of the total potential profit on the position. When a spread gets to the 50% profit level, especially after a short time, I always look to capture the gains.

There are two positions that expire today.

The first is the short $23 call on HOG. HOG closed in the money, so the odds favor the calls being assigned.

The second position is the short $18 call on OSTK. OSTK closed just under the $18 strike.

Hold both positions and if I suggest an adjustment, I will send a separate email.

After the bounce on Wednesday, the market sold off again. The day ended with the S & P 500 closed 23.10 points lower.

The day closed out at 2,948.51.

The range for the day was 39.93 points. This was a contraction of 57% of the daily average true range, which now reads 69.56 points.

So, every day this week, the market has contracted. A contraction is simply when the daily range does not exceed the daily average true range.

If you include last Friday's contraction, there have now been five consecutive contractions.

These series of contractions tells us that we should see a range expansion soon.

This week's price action has been rather consistent. Monday closed higher, Tuesday lower, Wednesday higher, and yesterday lower.

But, I have to point out that this price action is happening just under the midband on the daily chart.

The midband now reads 2,983.53.

Wednesday's high was 2,980.29 and yesterday's high was 2,978.50.

So, we have now had two days where the high has tested the midband and could not clear it.

As you know, this is a resistance level until it is violated.

On the downside, the low from Monday, which was 2,913.86 should still be support.

And yesterday's daily bar closed at 25% of the range of the bar. This does suggest that the low of 2,938.57 should be violated before the high of 2,978.50.

The support area from yesterday's daily bar is in the 2,958 area.

Pre open, the S & P is trading about 4 points higher. This projects to an open around 2,952 or about 6 points below the support area.

At this point, the weekly price bar has a range of only 66.43 points. This is only 39% of the weekly average true range, which is 172.44.

The midpoint of the weekly bar is 2,947. And as of yesterday, the market is only one point above it.

So, watch to see if the market can hold this level.

On the upside, there is resistance on the weekly chart at 2,960. So, watch this level on a move higher.

NVDA is trading about $3.50 higher after reporting. PANW is trading about $15 higher after reporting.

And SPLK is trading about $10.55 higher.

Here are the Key Levels for the Markets:

$VIX:

Minor level: 39.84
Minor level: 38.28
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 <
Minor level: 27.35
Minor level: 25.78
Major level: 25.00

The VIX closed at 29.53. The VIX closed 1.54 points higher yesterday.

The VIX managed to close under the 30.47 resistance level.

This level and the major 31.25 level should be resistance.

Technical resistance is at 32.30.

S & P 500:

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
Minor level: 2,617.25
Minor level: 2,539.06
Major level: 2,500.00

The S & P closed at 2,948.51. The S & P continues to hold the minor 2,929.75 level.

The minor 2,929.75 level should still be support. Watch to see if the S & P can clear 2,968 on a rally.

There is technical support right around the 2,936 level.

QQQ:

Major level: 237.47
Minor level: 235.91
Minor level: 232.78
Major level: 231.22 <
Minor level: 229.66 **
Minor level: 226.56
Major level: 225.00
Minor level: 223.42
Minor level: 220.31
Major level: 218.75
Minor level: 217.19
Minor level: 214.06
Major level: 212.50
Minor level: 210.93

The QQQ closed at 228.87. This was the first close under 229.66.

So, the QQQ needs to reclaim 229.66 today to head higher. A close under this level would suggest a drop to 225.

The 230 area should be support from yesterday's daily bar.

IWM:

Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
Minor level: 142.19
Minor level: 139.06
Major level: 137.50 <
Minor level: 135.94
Minor level: 132.81 **
Major level: 131.25
Minor level: 129.69
Minor level: 126.56
Major level: 125.00
Minor level: 123.44
Minor level: 120.31
Major level: 118.75

The IWM closed at 134.24. This now suggests that the IWM should move up to 137.50.

131.25 should be support now. And the minor 132.81 level should as well.

The 133 area should be technical support.

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: 155.48

The TLT closed at 164.56. Watch to see if the TLT can clear 164.85. If it can, it should move up to 165.63.

The 165 area should be technical resistance.

The TLT is in a downtrend on the 60 minute chart. Resistance on that timeframe is around 166.

GLD:

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
Minor level: 153.91
Major level: 153.13

The GLD closed at 162.25. The GLD sold off 2.40. And closed under the 162.50 level.

Watch the minor 161.72 level. Two closes under this level and the GLD should drop to 159.38.

The minor 163.28 level should now be support.

Technical resistance is around 163.

XLE:

Minor level: 47.65
Major level: 46.88
Minor level: 46.09
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 <
Minor level: 36.72
Minor level: 35.15
Major level: 34.27

The XLE closed at 38.72. The objective for the XLE should now be up to 40.63.

The major 37.50 level should be support. And the minor 38.28 should also be support.

Technical support should be around 38. And resistance at the 42 level.

AAPL:

Major level: 325.00
Minor level: 321.88
Minor level: 315.63 **
Major level: 312.50 <
Minor level: 309.38
Minor level: 303.13
Major level: 300.00
Minor level: 296.88
Minor level: 290.63
Major level: 287.50
Minor level: 284.38
Minor level: 278.13
Major level: 275.00

Apple closed at 316.85. The objective for Apple should be up to 325.

The minor 315.63 level should be support.

The 316 area should now be support.

WATCH LIST:

Bullish Stocks: SHOP, REGN, NFLX, DPZ, HUM, NVDA, VRTX, RNG, LULU, WST, COUP, ZM, KLAC, SMG, BAND, MRNA, CHGG, AZN

Bearish Stocks: PSA, HSY, CAT, FDX, CB, AIZ, UPS, EXR, NTRS, ED

MDT Pro Tips - 5/22/20