The major indices all advanced less than one percent this week with the exception of the Russell 2000 which moved ahead by 1.45%, but in all cases volume came in below the prior two weeks trading in which the markets sold off. The long uptrend in the markets remains under pressure which has TTP being very cautious in opening new long positions, in fact, we are very slow to open positions in any direction until a new trend establishes itself. Our job, at the end of the day, is to increase the value of our trading account and if we see opportunity on the short side, so be it. If I had my druthers, the markets would trend higher without interruption with me never having to trade form the short side, but that is neither possible or realistic. It is difficult to make money in non-trending markets and it is even harder to make money swimming against the current. It always pays to study the major indices on a daily and weekly basis so that we are “in sync” with our trading. Even if you plan to never short stocks, learn to see the market from both sides as this will improve your timing and trading from the long side. Since June 1st, the markets are essentially flat with the exception of the Dow, which is up just over 2.5%. Additionally, the indices have shown signs recently that they may, I repeat may, be transitioning from their current longer term uptrend that began in July of 2016 and I believe our current trading portfolio reflects this. So, without further ado, on to the charts starting with the indices before moving on to our current open trades.
S&P 500- The SPY ETF tried to rally this week up over its 50 day EMA but ran into some resistance near its prior breakout level around 245.00. Fridays session showed promise as the index traded higher for most of the day before closing poorly nears its low and essentially resting right on the moving average at the close. Our distribution count is at six days over the last twenty sessions however, the July 31st distribution day will come off the count after Mondays trading. Remember that five such days over the course of 20 trading sessions warrants caution.
NASDAQ- The story was similar here as the Composite wrestled with its 50 day EMA for four sessions before also giving back Fridays gains and closing just underneath that level. The difference here in comparison to the S&P is that the Nasdaq never came close to threating its prior breakout level this week, near 6340. The distribution count here is identical to the S&P at six, with the July 31st session coming off after Mondays close.
IWM- This has been, without doubt, the worst performer of the group recently so it’s no surprise that the index had the best bounce this week closing higher by nearly 1.5%- although volume was less than spectacular. We had been looking for support near the bottom of its eight month trading range near 133.00, so far price has found support just above that level near 134.00. It remains to be seen how far this bounce takes us, the Russell currently sits about 1.5% below its 50 day EMA.
QQQ- The Nasdaq 100 ETF is essentially flat over the last three weeks and has four distribution days in the count over the last 13 sessions. It managed to close just above its 50 day EMA but was the worst performer this week out of the group finishing up just over one half of a percent, narrowly beating out the NASDAQ for the honor. Next weeks trading will hopefully offer up a better clue as to where we may be headed.
HIIQ- Not much to report here and that’s okay because boring in the world of trading is usually a good thing. LONG since 6/14, we are currently up just over 58% on the remaining quarter of our trade after banking gains of 13.56% on the first half of our shares and 46.88% on a quarter of our shares. We are trying to give the stock some room to hopefully run higher and have inched our stop up along 50 day EMA which currently sits near $28.50.
SEDG- LONG since 6/23 we are also in trend following mode here with SolarEdge. We booked quick swing trade gains of 9.32% prior to earnings on the first half of our shares, then booked another 28.59% on a quarter of our shares just after earnings. Hoping to score a longer term gain here as well, we will trail our stop near the 50 day EMA, currently near $23.70. Based upon Fridays close of $26.80, we are up 24.80% on our remaining position.
GILD- LONG since 7/13 at a price of $70.81, we are trying to ride a trend here on the remaining half of our shares. Similar to SEDG, we booked modest profits of 4.69% on half our initial position just prior to earnings (which is our rule). With a close on Friday of $73.79, we are still up over 4% on the remaining half of our shares. We are going to hold our stop near breakeven at $70.81 on the last half of our shares. If the stock can pull away over the next week, we may be able to bump the stop up along the 50 day EMA here as well.
LUV- Moving on to the SHORT end of the portfolio, we have Southwest Airlines. Short on 8/7 at a price of $55.38, the stock sold off hard mid-week and that enabled us to take half our shares off at $52.04 netting us a gain of 6%. This was a bit shy of our original target near $51.30 but as we preach here at TTP, we manage our short positions with much more discretion because pullbacks can be swift and sharp, witness Friday move up in LUV of 3.88%. This is not all that surprising with the stock having been off over 20% from it’s peak in early July. Airline stocks, historically, can either be in extreme favor or disfavor so we will try to ride the second half of our position for further gains, however we are keeping our stop tight near breakeven. Despite the rally on Friday, we are still up 4.8% on the second half of the trade.
TZA- This is our short trade on the Russell 2000 Index. We took a LONG position on this inverse ETF at a price of $16.43 on 8/8 and we able to bank 12.53% profits on the first half of our shares in only nine trading days. We are currently up 6.24% on the second half of the trade and will hold should the trend down in small caps continue. We currently have our stop placed near $16.70.
QID- LONG at a price of $16.29 on 8/17, we are essentially flat here. This is an inverse ETF trade as well that will benefit from a move lower in the NASDAQ 100. We entered this trade with the view that the NASDAQ Composite may be transitioning in trend. This was attractive from a risk to reward ratio. Should the index reverse and go on to make new highs we will be stopped out at only a small loss of under 5% however, a continued move down could net us a swing trade gain of close to 10%. This is still a full position with the stop near $15.55.
AXTA- Finally we have our lone new position taken late on Friday and it is a SHORT trade on Specialty Chemical Company Axalta. The stock gapped down after an earnings miss on 8/3 and traded as much as 12% lower before bouncing over the last three weeks. This enabled us to place a nice risk to reward trade here. Our trade was filled at $29.23 and we placed our initial stop loss near $31. Meanwhile, our initial swing trade profit target on the first half of our shares is near $26 giving us a risk/reward ratio of close to 2:1. The stock ultimately closed Friday at $29.14 leaving us with a modest .25% gain one day in to the position.
That’s all for now. Enjoy your weekend and be careful out there!