The markets followed through on their rally attempt this week on an increase in volume putting us back into confirmed uptrend mode here at TTP. As a result, we stuck our toe in the water with a new long trade on Supernus (SUPN). When markets show a follow through like this after a period of negative sentiment, it is a time to look to stocks acting well in leading groups for possible new purchases. Although we trade more pullbacks and transition set ups than breakouts, we do look to some breakout trades when markets appear to be starting new uptrends. That doesn’t mean traders should be shooting from the hip and firing of trades at a high rate. It only takes a few well contemplated trades to outpace the competition, so move slowly and let the market continue to prove itself in the early stages of what may be a new trend and as always, focus the majority of your attention to the top 20-30 performing sectors in the market. Right now a few of those sectors atop the list are Wireless Telecom, Solar Energy, Biotech, Internet Retail and Gaming Software. As we always preach here, study the major market averages on a daily and weekly basis so that your trading is in sync with the markets. This way you will be prepared to act appropriately at turning points in the market. In short, be prepared and flexible because unprepared and stubborn will quickly drain your trading account. With that, let’s take a look at the charts starting with the major averages before moving on to our current open trades.
NASDAQ- We start with the Naz this week as it led the way with a 2.7% gain, its best weekly performance of 2017. The Composite strung together five straight up days and finished the week just shy of all-time highs. The index is now back above its prior breakout level near 6340 and well above its 50 day EMA. The Distribution picture is improving here as selling days are down to four over the last 20 sessions. The mid-week powerful follow through on an increase in volume puts us back in uptrend mode.
SPY- The S&P 500 had a strong week as well and finished within 1% of record highs. The index, like its NASDAQ counterpart, is back above its prior breakout level and 50 day EMA. The mid-week rally culminating with a big move on huge volume on Thursday puts us back in bull mode. We still have five distribution days in our 20 session count but the August 8th session will come of the books early next week lending to an improving picture here.
IWM– The small cap index, which had been a weight on the markets, finally flexed its muscle this week and finished with a close over its 50 day EMA for the first time in nearly a month. Finding support near the bottom of a nine month consolidation, the index now seems like its ready for another run at all-time highs after being rebuked near those levels all summer. The distribution picture here looks much better recently, with only three such days in the count.
QQQ- The NASDAQ 100 Index narrowly missed finishing at an all-time high Friday. Although the action was positive here this week, the only chink in the armor I can find is the relatively weak volume that the rally started with, however, volume did increase sequentially as the index advanced through the week and its tough to argue with all-time high territory. Distribution days sit at four over the last 20 sessions with two of those sessions coming of the count later next week.
Now on to the portfolio where we are currently LONG three positions and SHORT two positions. We were stopped out of HIIQ after a long ride and we ended up booking gains of just over 27% on our entire position. We were stopped out of TZA, our short Russell 2000 trade, at a gain of 6% on the entire trade and finally, we were stopped out of QID, our short Nasdaq 100 trade, at a small loss of just over 5%.
SEDG- LONG since early July at a price of $21.47, we are riding the trend higher in this solar stock after scaling out for gains of 9.32% and 28.59% thus far. With the stock closing the week at $27.00, we are up 25.73% on the last quarter of our shares. The stock has been consolidating its post earnings gap up for nearly a month and has now reclaimed its 10 day MA. We have inched our stop up slightly to near $24.00.
GILD- We took a LONG positon on Gilead Sciences on 7/13 at a price of $70.81. We booked modest short term swing gains of 4.59% on half our shares in late July just prior to earnings (by rule here at TTP, we will normally take half our positon off the table before earnings announcements). The stock has been on a tear after announcing the acquisition of Kite Pharma several days ago and closed the week at $83.75 leaving us up 18.27% on the second half of our shares. Trying to capture a bigger long term gain, we are placing our stop down near $76.00 as we do not want to get stopped out on a normal digestion of this recent large move.
SUPN- Our newest trade in Supernus Pharma reflects the current strength in the biotech area. We took a LONG position on Friday afternoon at a price of $47.00 as the stock broke out of its recent consolidation. We placed an initial swing trade target near $51.00 on the first half of our shares. Our initial stop loss is placed near $44.25. The stock has been a relative strength leader in a hot group, so hopefully we found a good trade here. The stock closed the day at $47.40 leaving us up just under 1% one day in to the position.
LUV- Spotting a potential top in the airline sector in mid July, we opened a SHORT position in Southwest Airlines in early August at $55.38. We were able to book short term swing gains of 6% fairly quickly and are now riding the second half of the trade in trend following mode. Should the market continue to follow through and trend higher we may be swimming bit against the current but we still like the potential here. The worst case scenario would have us stopped out of the balance of our trade at breakeven netting us a modest gain on the entire position. With a Friday close of $52.19, we are up 5.73% on those remaining shares.
AXTA- Lastly, we have our SHORT trade in Axalta. We opened this position late last week after the stock pulled back after a gap down on an earnings miss leaving us with what we felt was a good risk/reward trade. We were filled at $29.23 and with the stock finishing the week at $29.47 we are essentially flat on this trade so far. Our initial swing trade target is near $26.00 with an initial stop loss near $31.00.
That’s all for now, enjoy your holiday weekend and be careful out there!