September 28, 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.

Friday, I suggested selling the October $110 puts on the QRVO position against the long October $120 Puts. The maximum gain on the position is limited to $10 per contract, but it reduces the original cost by 17%.

I also suggested another weekly covered call on CLVS. The idea was to buy CLVS and sell the $6 call that expires this coming Friday. This now means you should have two short calls that expire this Friday.

And finally, I suggested a debt spread on MSFT. The alert suggested buying the October 16th $207.50 call and selling the $212.50 call against it.

The S & P managed to make a strong reversal on Friday. For the day, the S & P closed 51.87 points higher.

The day closed out at 3,298.46. And the intra day range was 78.44 points. This again exceeded the daily average true range, which is now 62.91 points.

And the day closed at 89% of the range of the daily bar. This suggests that the high of 3,306.88 should be violated before the low of 3,228.44.

And the support from Friday's daily bar should be in the 3,268 area.

In Friday;s morning update, I mentioned this ... "The key level on the downside is around the 3,228 area. If this level cannot hold, a test of yesterday's low would be possible. Yesterday's low was 3,209.45."

And as it turned out, the low on Friday was 3,228.44 or 44 cents above the price levels I mentioned before the open Friday.

If you read the update, you caught the low for the day.

The question is how did I come up with that price?

It is actually rather simple and I will share with you how I came up with it.

Thursday's daily bar was essentially a doji bar. And with a doji bar the support level is around the midpoint of the close and the low.

And as it turned out, this worked out to 3,228.02. The key is to know these levels in advance. As I wrote in Fridays update, the idea was to look for support around that level and if it didn't hold, a test of the low would have been the next logical move.

As it turned out, the low for the day held right at the 3,228 level.

For the week, the S & P closed 21.01 points lower. This was the fourth consecutive lower weekly close.

But, the weekly price bar closed at 78.1% of the range of the weekly bar. This suggests the weekly high should be violated before the low.

And the support from last week's weekly price bar is in the 3,266 area.

Also, the 3,254 area should be support.

Pre open, the S & P is trading about 48 points higher.

This projects to an open around 3,346 or around 40 points above Friday's high. Support based on the projected gap should be around 3,326.

The projected open should also take out last week's high of 3,323.35. This level should also be support on a pullback.

Here are the Key Levels for the Markets:

$VIX:

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
Minor level: 21.10

The VIX closed at 26.38. For the day, the VIX closed 2.13 points lower.

If the VIX closes under 27.35 today, I would expect a drop to 25.

The key now will be if the VIX can hold the midband on the daily chart. It closed just above it once again.

That level is now 26.19. Yesterday's low held just below the midband.

S & P 500:

Major level: 3,593.60
Minor level: 3,554.55
Minor level: 3,476.45
Major level: 3,437.40
Minor level: 3,398.35
Minor level: 3,320.25
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

The S & P closed at 3,298.46. By clearing the 3,281.20 level, this should now be support.

The next minor level is 3,320.25. Two closes above this level and the S & P should head up to 3,437.

The 60 minute chart for the S & P is still bearish and is trading under the midband. That level should be the objective, which is 3,388.

QQQ:

Minor level: 289.06
Major level: 287.50
Minor level: 285.94
Minor level: 282.81
Major level: 281.25
Minor level: 279.69
Minor level: 276.56
Major level: 275.00
Minor level: 273.44
Minor level: 270.31 **
Major level: 268.75
Minor level: 267.19
Minor level: 264.06
Major level: 262.50
Minor level: 260.94
Minor level: 257.81
Major level: 256.25

The QQQ closed at 271.56. The QQQ closed 6.17 higher.

Watch the minor 270.31 level today. A close today above this level and the QQQ should test 275.

The QQQ broke under the midband on the 60 minute chart. That price level is 277.40 and should now be resistance.

IWM:

Major level: 162.50
Minor level: 160.94
Minor level: 157.81
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 <
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94

The IWM closed at 146.41. The IWM closed 2.34 higher on the day.

This put the IWM back above the minor 145.31 level. A close today above this level and the IWM should head up to 150.

It closed back above the midband, which is now 145.95. Expect a move up from the midband.

144 is the lower band on the 60 minute chart and the IWM took that out as well. The IWM is oversold.

TLT:

Major level: 171.88
Minor level: 171.10
Minor level: 169.53
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

The TLT closed at 165.12. It closed flat.

To move higher, the TLT needs to recoup the 164.85 level. If not, a drop to 162.50 would be expected.

The 165 area is still technical resistance. This is the key area at the moment.

Short term charts remain bearish.

GLD:

Minor level: 188.28
Major level: 187.50
Minor level: 186.72
Minor level: 185.16
Major level: 184.38
Minor level: 183.60
Minor level: 182.03
Major level: 181.25
Minor level: 180.47
Minor level: 178.91
Major level: 175.00 < HIT!
Minor level: 174.25
Minor level: 172.70
Major level: 171.89

The GLD closed at 174.94. The GLD closed .50 lower on the day.

The GLD did drop under the 175 level, as we expected. If the GLD can hold this level, I would expect a bounce.

The GLD is at that lower band on the 60 minute chart. That level is 172.80. Watch to see if it can hold.

Oversold and due for a bounce.

XLE:

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: 34.37
Minor level: 33.59
Minor level: 32.03 **
Major level: 31.25 <
Minor level: 30.47
Minor level: 28.90
Major level: 28.12

The XLE closed at 30.18. A drop to 28.12 iis possible, but the XLE is oversold and could bounce before that move.

Short term the XLE is oversold. It did move above the lower band on the 60 minute chart, which is now 28.76. This should be support on a retest.

Looking for a bounce at the lower band.

AAPL:

Minor level: 140.63
Major level: 137.50
Minor level: 134.38
Minor level: 128.13
Major level: 125.00
Minor level: 121.88
Minor level: 115.63
Major level: 112.50 <
Minor level: 109.13 **
Minor level: 103.13
Major level: 100.00

Apple closed at 112.28. Apple managed to close $4.06 higher.

If Apple can clear 112.50, look for this level to be support.

Apple broke under the midband on the 60 minute chart. That level is 117 and should be resistance. Apple has crossed into a downtrend on the 60 minute chart. Short term momentum is bearish.

The lower band is 99 and that should be support now.

WATCH LIST:

Bullish Stocks: ZM, FDX, ROKU, NKE, GH, Z, CNI, DG, AAXN, NTRA, RUN, TWTR, VSLR, TOL,

Bearish Stocks: LMT, BIIB, FLT, CME, CI, BA, IBM, CB, CBRL, ROST, YUM, BAX, EW, HAS, WYNN