Reviewing This Week's Market Moves & What Lies Ahead
A deeper look into recent action & How to adjust to different environments
Hi all 👋 Hope everyone is doing great!
In this article I will go over:
Situational awareness - A review of what the general market and indices are showing us
Industry groups - What groups are breaking down vs showing relative strength
A recap of the trades I took this week
The action displayed by leading stocks
Situational Awareness
Despite the SPY 0.00%↑ being stronger than the QQQ 0.00%↑ as of late, a daily chart shows it is currently near the lower-end of this mini-consolidation following a reversal with a poor close on Friday.
Daily chart may show too much noise - on the weekly we can see a successful test and hold of the 20 weekly-moving average while price is still well-above a curling 10WMA.
On the other hand, the QQQ 0.00%↑ is acting weaker but does show a successful test and hold of a curling 10WMA.
The choppy action in the indices has led me to make some adjustments - I am really working on trying to bring down my average loss, in my opinion, the main component of a profitable trading system is vigorous risk management via the ability to cut losses ruthlessly and quickly.
Minimising losses allows the wins to take care of themselves automatically, and so that is why the majority of my stops have been quite tight and often based on intraday consolidations to avoid risking too much. Specifically due to the choppy nature of the current market, now more than ever, I do not want to expose my self to too much risk per trade as that would make me susceptible to getting chopped up and destroying my equity curve by a thousand cuts.
Specific Industry Analysis
XLE: In one of my recent private subscriber posts - Review of Market Action with Focus List for 2nd December, as shown below, I mentioned the potential weakness energy was showing:
Now, we can see how the break of that mentioned trend-line really opened things up to the downside.
Subscribe to never miss another update!
XLV & XLI - Healthcare and industrials with recent relative strength
When these are the industries showing relative strength while the “typical growth” ones are not, it is a clear indication of the kind of environment we are in!
Trades taken this week
Monday 5th December
Long
SATX - Setup: DTL break in a stock that showed clear strength rallying +985% within 2 weeks and then offering an entry on this consolidation
Entry: 22.65
Stop: 21.89
Initial risk: -3.36%
Closed @ 27.2
P/L: +20.08%
SPB - Setup: HVC entry following a +26% gap-up.
Entry: 66.70
Stop: 66.3
Initial risk: -0.60%
Closed @ 65.81
P/L: -1.33% (slippage made me take a near-double my initial risk loss)
Short - Setup: China names on a G2R reversal after what looked to appear like an industry-wide exhaustion gap-up in the morning
NIO
Entry: 13.23
Stop: 13.46
Initial risk: -1.72%
Closed @ 12.78
P/L: +3.45%
FUTU
Entry: 65.9
Stop: 66.55
Initial risk: -0.99%
Closed @ 64.1
P/L: +2.73%
LI
Entry: 22.69
Stop: 22.80
Initial risk: -0.48%
Closed @ 22.82
P/L: -0.57%
Wednesday 7th December
SMCI - Setup: DTL break with entry above previous HOD, following a pullback to the 20EMA with a strong close above after some weakness.
Entry: 86.55
Stop: 85.69
Initial risk: -0.99%
Closed @ 85.69
P/L: -0.99%
Thursday 8th December
ACLX - Setup: Breakout of horizontal resistance of a well-defined consolidation that was formed by a pullback.
Entry: 20.53
Stop: 20.24
Initial risk: -1.41%
Closed 48% @ 21.26 and 52% @ 27
P/L: +18.06%
Friday 9th December
RENT - Setup: HVC Reclaim following a +74% gap-up on earnings
Entry: 2.39
Stop: 2.34
Initial risk: -2.09%
Closed @ 2.60 avrg
P/L: +8.87%
Action of Potential Market Leaders
AEHR - Some distribution coming in on Tuesday with a - 11.5% session, however this was followed by a reclaim and close above the 20EMA:
ENPH - On the back of what looked to be a potential successful breakout last week, this then went on to fail that breakout with a -7.7% session on Tuesday, as so many other stocks have been doing
FSLR - which was arguably the strongest stock in the market for sometime, is also breaking down along with the KMAs that are beginning to curl downwards - not a great look:
It is difficult to get overly excited about the recent market action, however, I do think that it is still very possible to continue growing your account even in this challenging market - the key is choosing spots with low-risk and practising progressive exposure with an equity-curve mindset at all times.