A Lesson on Tesla | Trading AAPL, ARKK and PG

Let's see how the market handles yesterday's rip and shrinking holiday volume

Technical Breakdown 

• NYSE Breadth: 86.7% upside volume (!)

• NASDAQ Breadth: 81.1% upside volume (!)

What a robust day of breadth, which was strong out of the gate and didn’t let up. Interestingly, the S&P and Nasdaq both sold off in the first hour of trading. But because the breadth had remained so strong, it should have had buyers looking for some type of low to buy against. 

There were pros and cons to the day. 

We had some decent follow-through on UNH and my-oh-my, that buller reversal in Canopy Growth (CGC) really paid the bills this month (and closed at the high!) 

We came into the week not necessarily overly bullish on the indices, but bullish on a handful of setups. The one that did get me though? Tesla. 

A Lesson

I had some mixed signals flying around on Tuesday. Breadth was through the roof, even as the S&P was moving south. Growth stocks were performing well and TSLA opened higher but was not robust. 

It gave us that quick trigger up through Monday’s high (daily up) and I went with that. But it petered out almost immediately and hit my stop. Here’s what I wrote before the session: 

“With Tuesday’s gap-up though, I don’t know that we’ll get a test of these measures in the short term. Daily-up over $922 may be enough to put $950 in play, then potentially the 10-day moving average.”

“These measures” referred to the 200-sma on the 4-hour chart and the 21-week moving average. Ironically, we got a near test of these measures once the daily-up had failed. 

Tesla later went daily-up again, closed higher by almost $20 a share from our entry and is up another ~$35 in the pre-market through our first set of targets. 

That’s a bitter pill to swallow, as I would have been in this one had I approached with more patience. 

In the end, I shouldn’t have been so quick to trade the daily-up rotation with the indices eroding lower and I should have waited for a 5-minute close above the trigger. 

I just knew the potential that Tesla would have to give us $40 to $50 a share and didn’t want to miss it. That overzealousness is the difference between sitting in a nice trade and trimming into profit and getting stopped out on a premature signal.  

The strong breadth also gave me a bit too much confidence. 

Trades fail all the time, so why is this one any different? It’s a lesson and it’s a reminder. On rotations, we need more proof than just a wick through the level we’re watching. We need it to sustain. Find the positives in our failures and we become infinitely better (both in trading and in life). Cheers!

S&P 500

S&P Daily | Click to Enlarge

With yesterday’s rip and close near the highs, the S&P 500 is back above the 50-day, 21-day and 10-day moving averages. I would love to close Wednesday lower by less than 10 to 12 handles (or ideally, finish higher). 

That keeps the S&P 500 above all of the aforementioned moving averages. If we can’t do that, I at least want to see the S&P maintain above the 50-day. 

On the upside, 4665 is the next level to keep an eye on before 4700. 

Individual Stocks — ARKK, PG, AAPL

Volumes may start to evaporate after the opening few hours today, as traders start to pack it in early for the holidays. 

Our buy-the-dip in PFE (flagged on Monday, triggered on Tuesday) is bouncing nicely. UNH continues to hold up as we ride it against a break-even stop. We got the declining 10-day in Canopy Growth, which gave us a chance to trim and/or raise our stops. 

So in essence, we are watching the market today but just looking to milk some of the trades we still have in place. That said, there are a few specifics.