May 26, 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.

You should have been assigned on the HOG $23 call on Friday. With the two rounds of call options that were sold against the position and the gain booked on Friday, the total return worked out to 10.1% for 17 days.

I did suggest an adjustment on the OSTK position. The idea was to buy back the short May 22nd call and roll it out to next Friday. This results in being short the May 29th - $18 call. It also means that you should now have collected $1.60 per share in call premium.

And I also suggested a new position on Friday. It was a weekly covered call on MOS. The suggestion was to buy MOS and sell the $12 call that expires this Friday.

The S & P 500 managed to close slightly higher on Friday. The day ended with the market closing 6.94 points higher. The week closed out at 2,955.45.

The range for the day was only 23.17 points or less than one half the daily average true range, which is 66.25.

A contraction ahead of a holiday weekend is not out of the norm. In fact, the market tends to contract before a long weekend.

The day closed at 94% of the range of the daily price bar, so we do expect the high to be violated before the low.

I mentioned Friday that the midpoint of the weekly price bar before the open was 2,947 and a close above it would be bullish.

And as it turned out, the market dropped to a low of 2,933.59 before rallying to close above the 2,947 level.

So, Friday, the S & P made a new low and managed to rally back to close above the midpoint of the weekly price bar.

We did expect a new low because the close percentage from Thursday's daily price bar was only 25%.

The support area from Friday's daily bar is in the 2,945 to 2,951 area.

For the week, the S & P closed 91.75 points higher. The weekly range was only 66.43 points.

The weekly range was only 39% of the weekly average true range.

These contractions suggest that the market will expand at some point.

The support area from last week's weekly price bar is in the 2,947 area. Below that area, there is support around 2,935.

Pre open the S & P is trading around 59 points higher.

This projects to an open around 3,014.

This is critical because it would project to an open above the midband on the daily chart.

The midband is now 2,983, so the market should open about 31 points above it.

As I have been saying this level should be resistance until it is violated. It should now be support. So, watch this level on a sell off.

Earnings do continue this week. Wednesday afternoon we get earnings from ADSK and WDAY.

Thursday afternoon, we hear from COST, CRM, and ULTA.

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 < Hit
Minor level: 27.35
Minor level: 25.78
Major level: 25.00

The VIX closed at 28.16. The VIX closed 1.37 points lower yesterday.

The VIX hit the major 28.13 level. At this point, watch the 27.35 level on the downside. Two closes under this level and the VIX should drop to 25.

The minor 28.91 level should be resistance.

Technical resistance is around 29.

S & P 500:

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

The S & P closed at 2,955.45. The S & P should open around 3,014. This is above the major 2,968.80 level, which has been the objective.

This level should be support. And the minor 3,007.85 level should be support as well.

And of course, the midband at 2,894 should also be support.

There is technical support right around the 2,950 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 229.66. The QQQ managed to rally back to close exactly on the 229.66 line.

This suggests the QQQ would still need two closes under this level to drop to 225.

"So, the QQQ needs to reclaim 229.66 today to head higher." This was from Friday. A close on the level is just as good.

229.66 should also be support.

The 229 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 134.89. This now suggests that the IWM should move up to 137.50. But, it needs to clear 135.94.

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

The 134 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 165.55. Watch to see if the TLT can clear 164.85. If it can, it should move up to 165.63. And Friday, the TLT did clear the major 165.63 level.

The TLT will need to clear the major 165.63 level to head higher.

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 163.21. The GLD closed 0.96 higher. It will need twoc closes above 163.28 to head higher.

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

And two closes above the 163.28 level and the GLD should head up to 165.

Technical support is around 162.

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 38.48. 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 resistance should be around 38. If the XLE can hold this level, it should head higher.

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 318.89. The objective for Apple should be up to 325.

The minor 315.63 level should be support. And Friday low dropped to 315.35. 315.63 should still be support.

The 317 area should now be technical support.

WATCH LIST:

Bullish Stocks: AMZN, GOOGL, SHOP, TSLA, ADBE, DPZ, NVDA, AAPL, LULU, COUP, ADSK, SPLK, MSFT, CRM. EHTH, DOCU, PYPL

Bearish Stocks: PG, PGR, TRI, ORCL, BCE, MDLZ, FTS, TAP