While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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
TEVA Long at $15.30
TEVA Short Jan 4th-$15.50 Call @ $0.45
DIS Long Jan 25th $107 Call @ $3.35
DIS Long Jan 25th $107 Put @ $3.10
XLong at $20.30
X Jan 18th - $21.00 Call @ $0.50
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Friday, you should have been assigned on the short $15.50 call on TEVA. The result was, assuming you followed the alert, that you sold your shares at that price. This resulted in a 4.2% gain for about a week and one half.
I also suggested a covered call on US Steel (X). With that setup, you should have bought the stock and sold the $21 call that expires in two weeks.
This recent price action is not unusual when price is trading around the lower band. The one thing we know with certainty is that a market or stock is tremendously oversold when it does close under the lower band.
The extreme bollinger bands do the best job of measuring oversold or overbought conditions of any technical tool I have found.
For the past week, the S & P 500 managed to close above the lower band. And then Thursday, it had the 62 sell off to back under the lower band.
And then Friday, as you know, the market had the massive 84.05 point move higher, to close at 2,531.94.
This is the type of price action that can happen around the lower bands.
And speaking of price action, I was looking at Monday's update. And the expected price action when you combine the daily and weekly charts were for a pullback at the beginning of the week, with a price expectation that last weeks high would be violated before the low.
This is what I wrote about Friday's daily bar ... "The market closed Friday at 2,485.74 and at 27% of the range for the day. So, there is a slight bearish bias for today."
And I wrote this about the prior week weekly price bar ... "And it closed at 80.1% of the weekly bar. This puts the odds of violating last week high of 2,520.27, before the low of 2,346.58, right at 80%."
I finished up by saying this ... "And the support area from last week's weekly bar is in the 2,433 to 2,443 area."
I bring this up because as it turned out the low for this week was 2,443.96 or about one point above the upper end of the resistance area I mentioned on Monday.
And the low did hold above the prior week's low.
The question is how do I derive these support levels?
Actually, it is rather simple. 2,433,43 was the midpoint of the prior week bar. And 2,443.15 was the midpoint between the open and close.
And what is interesting is that the weekly low of 2,443.96 literally came on the last price bar on Thursday.
Then Friday, we got the bullish gap open and the price moving 84 points higher to take out the prior week high by about 18 points.
Just knowing the projected price action would have put you in the correct position to take advantage of this situation.
And it becomes a low risk entry.
Why do I say that?
Because the weekly price expectation was that there was an 80% chance of the prior week's high being violated before the low, the closer to the weekly low that price drops the lower the entry risk.
This is because you can buy with a stop below the prior weekly low. You know if price does take out the weekly low you don't want to be long.
I hope this is starting to make sense.
In fact, I will scan for high close percentage weekly price bars and look to see the next week that are trading around their midpoint. If they are, it tends to be worth the risk to buy the stock with an expectation the price will take out the prior weekly high.
By the way, a simple scan of the weekly price bars that closed greater than 90% of their weekly price bar yields quite a few results for this week. Some examples are GOOGL, BA, GS, CMI, CAT, FANG, PSX, LVS, FSLR and AMAT.
If you have a chance, track a few of these to see how the price expectation worked out.
Last week's weekly price bar closed at 93.5% of the range, so this puts the odds of violating last week's high before the low at over 90%.
The support level from last week's price bar is in the 2,491 to 2,515 area.
And Friday's daily price bar certainly qualified as a long-range candle. The daily range was 63.74, but that included the gap. The close to close relationship measured 84.05.
And with an average daily range of 63.36, the range was 133% of the average.
This suggests that support from Friday's daily bar is in the 2,503 to 2,506 area.
Pre open, the S & P 500 is trading about 2.50 points lower.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
Major level: 43.75
Minor level: 40.63
Minor level: 34.38
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00
Minor level: 23.44 **
Minor level: 20.31
Major level: 18.75
The VIX closed at 21.26 for the day. It dropped 4.19 on the day. For the day, the VIX was down 15.99%.
It is now heading to test the midband on the daily chart. That price level is 16.75.
With a close today under 23.44, the VIX should test 18.75.
21.88 should now be minor resistance. And 25 should offer strong resistance.
SPX:
Major level: 2,578.10 <
Minor level: 2,558.58
Minor level: 2,519.53 **
Major level: 2,500.00 <
Minor level: 2,484.38
Minor level: 2,453.13
Major level: 2,437.50
Minor level: 2,421.88
Minor level: 2,390.63
Major level: 2,375.00
The S & P 500 managed to clear the 2,500 level and close above 2,519.53. This now suggests that if the market can close above 2,519.53 today, it should head up to 2,578.10.
2,500 should offer strong support. And 2,519.53 should offer minor support.
QQQ:
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 **
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
The QQQ closed at 156.23. The QQQ took out the 156.25 level. To move higher, the QQQ will need two closes above 157.81.
If the QQQ can make a move up to 162.50, it could indicate this downtrend is over.
154.69 should offer support.
IWM:
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
The IWM closed at 137.19. The IWM did clear the 137.50 level.
Now it will need two closes above 139.06 to move up to 143.75.
The IWM will need to move up to the 143.75 level for me to consider this downtrend has ended.
TLT:
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 Hit
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
The TLT closed at 121.11, down 1.16 on the day. A close today under 121.49 and the TLT could test 120.31.
The daily chart continues to inch closer to an uptrend. It is now within 7 cents of crossing into an uptrend.
121.88 should be support. If 121.88 cannot hold, I would expect 120.31 to.
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 121.44. Watch to see if the GLD can clear the 121.88 level. If it can, I would expect it to head higher.
119.53 should offer support.
XLE:
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
Minor level: 58.60
Minor level: 57.03 **
Major level: 56.25
The XLE closed at 59.87. The XLE did hit the 59.38 level.
The next level on the upside is 62.50. It should offer resistance, so if the XLE can clear this level, I would expect it to head higher.
58.59 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 close at 88.05. It was down 0.77 on the day. It will need two closes above 88.48 to move higher.
87.89 should offer minor support. If that can't, I would expect 87.50 to hold.
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
Like the whole market, Apple reversed to the upside and was up $6.07. Started to look like nibbling on the long side makes sense.
If Apple can consolidate around these lows, that would be the trigger.
145.31 should offer minor support.
Apple is still above the lower band. That level is now 133.
WATCH LIST:
Bullish Stocks: HLF, GCO, AHL, NLY, AGNC
Bearish Stocks: ADBE, MMM, ALGN, BIDU, ASML, BABA, LGND, UPS, TXN, GRUB, ALB, SWKS, AKAM, AABA, CERN
Be sure to check earnings release dates.
