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.
CURRENT POSITIONS:
GOGO Long at $19.93
Total Premium Collected $1.95
ASNALong at $14.20
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
SNAP Long at $14.54
Total Premium Collected - $1.65
OI Long Feb $19 call @ $1.70
MDR Long @ $9.31
Total Premium Collected - $0.50
Short February $10 Call @ $0.25
RRC Long at $11.85
Total Premium Collected $.55
RRC Short Feb 15th - $12.00 Call @ $0.25
RIG Long at $8.81
RIG Short Feb 15th - $9 Call @ $0.26
.........................................................................................
Yesterday I suggested that you sell the $10 call on the MDR position that expires next Friday. This brings to 50 cents per share the amount of premium collected.
The S & P 500 continued higher yesterday. It ended up closing at 2,737.70, up 12.83 on the day.
But the key is that yesterday was the first close above the midband on the daily chart. The midband is now 2,730.50. And yesterday was the first close above the midband in two months.
It goes without saying that when the S & P 500 was trading under the lower band, to have a legitimate price objective about 400 higher was quite powerful. That's assuming you believed that a move back to the midband was possible.
But, quite frankly, I have seen this pattern happen over and over.
And it works on any time chart. From 3 minute charts to 60 minute charts.
It is almost like the midband is a magnet for price.
A few days back, I got an email from one of your fellow members.
His question was this. Now that price is at the midband, do we go short?
My response was rather simple.
I suggested we want to see more price confirmation before a short is warranted. In other words, we want to see price confirmation that the market is failing, or if the market can get through the midband.
The other fact I brought up was that the VIX was right at the midband and looked like it would break under it.
As it turned out, the VIX did break under the midband. This action actually preceded the S & P 500 closing above its midband.
On January 25th, the VIX closed at 17.42 which was just under the midband.
That day, the S & P 500 closed at 2,664.76 or about 74 points under the midband.
I bring this up because once again, the VIX preceded the market movement.
The real question is, did you believe a rally to the midband was possible when the S & P 500 was trading under 2,400?
Shoot me an email and let me know. I would love to hear your response. My email is davismdt@gmail.com in case you don't have it handy.
The issue at the moment is where do we go from here?
Well, now that we have closed above the midband, I would expect it to act as support.
It is possible that price could trade just above it and fail.
This happened three times as the market sold off.
But, a short at this point should only be considered on a strong close under the midband. Or should I say a weak close?
So, there are two scenarios at this point.
The midband holds as support. And if that is the case, I would expect a test of the upper band. The upper band is 3,004, so there would be another 300 points or so to the upside in that scenario.
Or the market fails and closes under the midband.
In that scenario, the market should retest the lower band.
The lower band is 2,457, so under that scenario, the market has about 300 points to the downside.
Either way, you know what to anticipate. And I will certainly continue to update the scenarios as we trade into the future.
Yesterday, the S & P 500 closed at 91% of the daily bar which puts the odds of violating the high before the low.
The support area is in the 2,731 to 2,733 range.
And the support from last week's weekly bar is still in the 2,670 to 2,576 area.
Here are the Key Levels for the Markets:
$VIX:
Minor level: 22.66
Major level: 21.88
Minor level: 21.10
Minor level: 19.53
Major level: 18.75
Minor level: 17.97
Minor level: 16.41
Major level: 15.63 <
Minor level: 14.85
Minor level: 13.28
Major level: 12.50
The VIX closed at 15.57. This was the first close under 15.63 since October.
To move lower, the VIX will have to break under 14.06.
A bounce here up to the 17 area would not be out of the question.
Oversold in the short term.
SPX:
Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40 <
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30
Minor level: 2,636.75
Minor level: 2,597.65
Major level: 2,578.10
Yesterday closed above the 2,734.40 objective. Target hit again.
2,695 should offer support on a pullback.
2,744.15 is a minor level on the upside. A close above this level should indicate that the market will head higher.
Pre open the market is down slightly. Bias to the upside remains.
QQQ:
Major level: 175.00
Minor level: 173.44
Minor level: 170.31 **
Major level: 168.75 <
Minor level: 167.19
Minor level: 164.06
Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25
Minor level: 154.69
The QQQ closed at 171.03 yesterday. It was the first close above 170.31. A close today above the minor 170.31 and the objective should be to 175.
169.16 is the midband and should be support.
171.88 is minor resistance on the upside.
IWM:
Major level: 156.25
Minor level: 154.69
Minor level: 151.56
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
The IWM closed at 151.12. At this point, the IWM will need two closes above 151.56 to move up to 156.
The midband is 155.92 and yesterday's close was about 5 points below it.
But, like the other major markets, short term charts remain bullish.
150 should now be strong support.
TLT:
Major level: 123.44
Minor level: 123.05
Minor level: 122.27
Major level: 121.88
Minor level: 121.49
Minor level: 120.70 **
Major level: 120.31 <
Minor level: 119.92
Minor level: 118.14
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
The TLT closed at 120.97. This puts the TLT back above the minor 120.70 level. A close today above 120.70 and the TLT should test 121.88.
120.70 should be minor support. Minor resistance is at 121.09.
GLD:
Major level: 125.00 <
Minor level: 124.22
Minor level: 122.66 **
Major level: 121.88
Minor level: 121.10
Minor level: 119.53
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
The GLD closed at 124.28. The GLD closed back above 124.22, so it will still need two closes under that level to drop.
A bounce to 125 should be the next minor move.
122.66 should be support on the downside.
XLE:
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75
Minor level: 67.97
Minor level: 66.41
Major level: 65.63 <
Minor level: 64.85
Minor level: 63.28 **
Major level: 62.50
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
The XLE closed at 65.14. The XLE is now within 40 cents of the 65.63 objective.
64.84 should now offer minor support. 67.19 should offer minor resistance.
Short term charts are bullish.
FXY:
Major level: 89.84
Minor level: 89.65
Minor level: 89.26
Major level: 89.06
Minor level: 88.87
Minor level: 88.48 **
Major level: 88.28
Major level: 87.50 <
Major level: 86.72
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
The FXY closed at 86.81. Literally sitting right on the midband which is now 86.80.
You know the implications if the FXY breaks under the midband.
86.33 should be support. And resistance should now be at 87.30.
AAPL:
Major level: 187.50
Minor level: 184.38
Minor level: 178.13
Major level: 175.00 <
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
Minor level: 167.19
Minor level: 164.06
Major level: 162.50
Minor level: 159.38
Minor level: 153.13
Major level: 150.00
Apple closed yesterday at 174.18. Apple did hit the $175 level.
With short term charts in uptrends, look to go long on a pullback.
171.88 should be minor support.
WATCH LIST:
Bullish Stocks: REGN, ULTA, WCG, OST, VRTX, WDAY, ZBRA, AMT, CRM, DECK, ADP, MOH, LLY, DTE, CCI, UAL
Bearish Stocks: ATHM, KMX, QCOM, WTW, URBN, SIG, GES
Be sure to check earnings release dates.