We have a lot to cover so lets get right to it. Over the last few weeks we said here that we were still bullish but proceeding with some caution and after another weeks trading under our belts our caution flag is still waving. Our biggest issue is with the large cap technology sector, QQQ. As you will see in the following chart, we have now registered six distribution days in only the last 14 sessions. Five distribution days over the last 20 trading sessions in any of the given indices usually puts us into a neutral stance. The NASDAQ has registered five such days, however it is important to note that the distribution day registered on June 6th on this index will come of the boards next week. The S&P 500 has fared better with only four distribution days and like the NASDAQ, it will lose one of those days from the count next week.
Now, before we all get too excited, we have to look at the overall landscape in context. We can’t flip a switch and turn into raging bears because we see some areas of concern. It is still possible we have a sector rotation in progress within a bull market, it is possible that end of the quarter trading of the institutions have skewed things a bit and still yet it is possible a correction of some sort is at hand. Traders need to check their bias at the door and pay attention to what the market is telling them. I might also note that market corrections, if that is what we are seeing, come in many varieties. They can be sharp quick hits before they suddenly reverse, they can bleed slowly lower, or we can simply start to churn sideways similar to the trading action we have seen in the Russell 2000 for the last seven months. In any event, we must stay opened minded and ready to change gears when appropriate.
So, what have we done here in response to what we have seen? Firstly, we stopped out of GOOS which locked in over a 10% profit on the entire trade. Secondly, we lifted our stop on NOVT (something we normally do not do) to raise some cash giving us a 4.7% loss on this trade. We also, seeing the extreme selling in the NASDAQ 100, opened up a LONG position in QID which is a bearish play on the index offering 2x leverage. The other two LONG positions still remain in the portfolio. We will remain in an extremely cautious position as we head into next week. With a shortened day of trading on Monday and a close for the holiday Tuesday, we may not be able to accurately gauge the markets till mid to late week. Here is a detailed look at where we our with our trades.
HIIQ- We initiated a LONG position here on 6/14 at $21.97 and were able to lock in swing trade profits of 13.56% in only seven trading days. We are still holding half of our position and are currently up 7%. We now have our stop near breakeven on the second half of this trade.
MDXG- This stock was frustrating for us this week. We opened a LONG position on 6/2 at $14.59 and the stock had been trending slightly higher since. However, it came within a nickel of our swing trade profits but it traded there so briefly before pulling back that we just weren’t fast enough with our discretion-such is trading at times. This is still a full position and we are maintaining our stop near $14.00.
QID- Detailed earlier in this edition, this is our “short” trade on the QQQ’s. We took a LONG position on 6/29 at $17.66. We currently have our stop set near $16.30. This position does not necessarily put us at odds with ourselves. It is possible we can see a correction in this area while other stocks in various sectors advance. We will manage this position with the same caution as our other open positions.
Enjoy the rest of your holiday weekend!