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
ASNA Long 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
RRC Long at $11.85
Total Premium Collected $0.30
FEYE Long at $16.70
FEYE Short Feb 1st - $17 Call @ $0.40
FCX Long March 8th - $11.50 Call for $0.54
FCX Short March 8th - $13.00 Call for $0.15
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Yesterday we added a debit spread on FCX. I did not suggest you buy a lot of time in this deal. This trade is based on FCX following through on the strong move it made yesterday/
I mentioned yesterday morning that it is easier to predict a range expansion than a directional move. This is because, after a contraction or a series of contractions, the market will expand.
And that is exactly what we had yesterday.
For the day, the S & P 500 closed 41.05 points higher. It closed the day at 2,681.06.
If you factor in the gap above Tuesday's high of about 3 points, the range was about 44 points.
With an average true range of 41.14 points, yesterday's range slightly exceeded the average.
But as you know, this move came on the heels of three consecutive contractions.
That is why yesterdays move was not a shock to me.
The question is how do you take advantage of this if you are trading intra day?
Typically, a strong day will begin with a gap and a move straight up off the open. That is what happened yesterday.
After the open, the S & P 500 ran up to a high of 2,668.57 when it stalled out. This was a move of about 15 points after the open.
It then stalled out right around 12:00 EST.
From there, the market spent about two hours pulling back and consolidating.
Then at 2:00 EST it began to move again.
The late day move was about 32 points and lasted about an hour.
If you were trading call options on the SPY, the move went about 3 SPY points. Enough to make some decent money.
Of course, this timeframe coincided with the Fed announcement. But the move early in the day gave you the clue it should continue higher.
The question remains how do you enter this trade?
I like to scope down to a 3 minute chart.
I want to see the 3 minute chart in an uptrend and I want to enter after the price gets oversold on that timeframe.
The other useful fact is that 2:00 EST is typically a critical intraday turning point.
A lot of times you can just come back at 2:00 and look for the set up I described above. If the technical set up is not there, you don't do the trade. If it is, then you're in business.
To give you an idea of the leverage with options, the SPY $265 call that expires this Friday had a low of $0.59 and a high of $3.59.
And this is with two days until expiration. Had this trade set up on a Friday, you may have been able to buy these options for 30 cents.
This is why I like this set up on a Friday.
Support from yesterday's daily price bar is in the 2,667 to 2,669 area.
And the close percentage was 78%, so the odds favor a violation of yesterday's high before the low.
Tesla reported last night and is off about $14 in the pre open. This afternoon we will hear from AMZN.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
Major level: 25.00
Minor level: 24.22
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
The VIX closed at 17.67. For the day, it was down 1.46 points.
The VIX is still just above the midband on the daily chart. That price level is 17.32 and the low yesterday was 17.54.
If the VIX can break under the midband, I would expect it to continue lower which would mean this bounce should continue higher.
Also, with a close under 17.97 today, the VIX should drop to 15.63.
SPX:
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
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00
The S & P 500 closed at 2,681.05, just above the minor 2,576.83 level. This now sets up a scenario where if the S & P 500 can close above 2,675.83 today, it should move up to 2,734.40.
This is the target I mentioned a little while back.
This is because it is not only a resistance level but it coincides with the midband on the daily chart.
The midband on the daily chart is 2,732.27, within 2 points of the line.
Knowing this in advance helps us to anticipate what the market should do.
2,661 should be minor support.
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 165.68. This now suggests that if the QQQ can close above 164.06 today, it should move up to 168.75.
169.13 is the midband on the daily chart for the QQQ.
164 should offer support.
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 147.80. The objective for the IWM is still to 150.
The IWM will need to clear 147.66 to move up to 150. Minor support is at 145.70.
And 146 should be technical support for the IWM.
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 120.93. The objective should be up to 121.88.
At this point, 120.70 should be minor support and at 120.50 if the TLT drops lower.
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 124.69. The GLD did hit the 125 objective we were looking for. Yesterday's high was 125.07.
123.44 should be minor support. At this point, the GLD will need to close above 125 to continue higher.
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 63.37. Yesterday was the first close above 63.28. A close today above 63.28 and the XLE should test 65.63.
62.50 should now offer support. And 63 is minor support.
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 87.66. With yesterday's strong move, it implies that the midband held as support.
At this point, support is at 87.50 and 86.72.
AAPL:
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
Minor level: 146.88
Minor level: 140.63
Major level: 137.50
Apple closed yesterday at 165.25. It closed up $10.57 after reporting earnings.
At this point, the next pullback would be an opportunity to go long.
162.50 should offer support. Short term charts are now bullish.
WATCH LIST:
Bullish Stocks: CMG, REGN, AVGO, WDAY, EW, VRSN, VMW, VRSK, XLNX, CHKP, WIX, YUM, CNI, NKE, SQ, WELL, ZEN
Bearish Stocks: FFIV, WB, DOX, QCOM, SIG, BITA
Be sure to check earnings release dates.