July 21, 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 closing the ZEN debit spread. The result was a 4 day gain of 52%.

The S & P 500 ended Monday closing at 3,251.84. The market closed 27.11 points higher on the day.

And the range for the day did expand. The daily range was 43.45 points. This did exceed the range from the prior three days. However, it did not exceed the daily average true range, which is now 54.30 points.

With the 69% close percentage from Friday, we did expect yesterday's high to be violated before the low.

And yesterday was a great example of using this statistic.

Why you ask? This is because the market opened yesterday within the body of the daily price bar from Friday.

In fact, the S & P opened relatively flat yesterday. So, you expect a move to take out the high before the low. The question becomes where should the low for the day come in?

And when?

As for the where the low should come in, we have the support level from Friday, which was the 3,220 area.

We also have the support level from the weekly price bar, which is around 3,215.

Both these levels I mentioned yesterday, so you should have them before the open.

As it turned out, the low for the day was 3,215.16, which was right at the weekly price bar support level.

From that price, the market proceeded to rally all day to hit a high of 3,258.61. This was a move of 43.45 points.

To give you an idea of what this intra day move means, let's look at the SPY $321 call that expires Wednesday afternoon.

This option had a low of $2.07 and a high of $4.70. That is a pretty good move for a day trade.

If you traded the option that expired Monday afternoon, your leverage would have been even better.

The second question is when should the low come in?

If we expect the prior day high to be violated before the low, then we should be looking for the low of the day to come in early in the day.

As it turned out, the low for the day hit right at 10:00 AM EST.

So, if you bought the weekly support level around 3,215 early in the day, your target was to take out the Friday high of 3,233.52. At least that should have been the minimum objective.

On tomorrow's webinar, I will show the intra days charts from yesterday and share how you could have stayed in the trade for the bulk of the move.

Yesterday closed at 84% of the range for the day, so once again we do expect the high to be violated before the low.

And the support area from yesterday should be in the 3,237 area.

Pre open, the S & P is trading about 26 points higher. This would suggest that the market should open around 3,278 or about 17 points above yesterday's high of 3,258.61.

So, the market should satisfy the close percentage requirement right at the open.

And the high of 3,258.61 should be support on a sell off. 3,268 should also be a support area.

Wednesday, after the close we hear from ALGN, CMG, MSFT, and TSLA.

Thursday morning we get earnings from TWTR and CTXS.

Here are the Key Levels for the Markets:

$VIX:

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 <
Minor level: 24.22
Minor level: 22.66
Major level: 21.88

The VIX closed at 24.46. The VIX closed 1.22 points lower for the day.

This was the first close under the major 25 level. Resistance should now be at 25 and 25.78.

And two closes under 24.22 and the VIX should drop to 21.88.

The VIX closed just above the midband on the daily chart. The midband is 24.58 and we should expect the VIX to continue lower.

S & P 500:

Major level: 3,281.20 <
Minor level: 3,242.15 **
Minor level: 3,164.00
Major level: 3,125.00
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 3,251.84. The objective for the S & P should still be up to 3,281.

And with a close above 3,242, this level should now be support.

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

Technical support is around 3,245.

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

The QQQ closed at 266.78. The QQQ reversed and almost hit the major 268.75 level.

And it closed back above the upper band on the daily chart, which is now 265.06.

This level should now be support. And 264 should also be support. And 265 should be technical support.

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 145.96. The objective for the IWM should still be up to 150.

The IWM closed slightly above the midband, which is now 146.00. Watch to see if the IWM can hold this level today.

145.31 should be 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

The TLT closed at 167.19. The objective for the TLT should be up to 168.75.

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

The TLT needs to clear the 167 level to move higher. And it is just above it. so, watch this level today.

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 170.94. The GLD should test 171.89. And yesterday, it came within 82 cents of the objective.

The minor 169.54 level should be support. And 168.75 should also be support.

Technical support should also be at 170.

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 36.08. After hitting the 27.40 target, the XLE has now had its first close under 36.72.

The XLE should drop to 34.37.

Watch the 36.72 level today. It would have to reclaim this level to head higher.

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 393.43. Apple reversed and closed $8.12 higher.
With a close above 390.63 today, Apple should run up to $400.

However, Apple is right at the upper band on the daily chart. That level is 405. This sets up a few price expectations.

And technical support is around 387.

WATCH LIST:

Bullish Stocks: REGN, CHTR, NOW, ILMN, LRCX, ALGN, APD, RH, MKC, CMI, ITW, VRSK, CTXS, TREX, DGX, VRNS, PGR, LOGM

Bearish Stocks: VMW, ADI, AZPN, C, PLAN, APPN, NTNX, SUN