Can the Markets Avoid New Lows? | Trading TSLA, AAPL, CAT
Can Apple hold its earnings gains and stabilize the stock market?
Technical Edge
NYSE Breadth: 69% Downside Volume
NASDAQ Breadth: 80.4% Downside Volume (!)
The QQQ and SPY finished lower everyday last week and have declined in all but one session so far this week. They are both gapping down now, with the futures lower by about 1%.
Can they turn things around, like on Monday?
Update: The futures erased most of their losses shortly before 9 a.m. but the question above still remains intact.
You all know I prefer a gap-down vs. a gap-up when we’re in a down tape. Just look at yesterday, where the SPY gapped up 1.13% before closing lower by 0.5% on the day.
Game Plan
There has now been talk about all sorts of rate hikes this year — not just four. BofA says it expects one 25 bps hike in each of the next seven meetings. The odds are creeping up for a 50 bps hike in March (the favored outcome is still a 25 bps hike) and odds are creeping up for 100 bps worth of hikes to come by September rather than November.
In short, the market has to account for these potential outcomes and so far, that has resulted in selling pressure. Meanwhile, sentiment is worsening but still not yet in “panic territory.”
S&P 500 Futures and SPY
This chart should be ingrained in every reader’s head by now. Earlier this week I called it our roadmap and that’s exactly what it’s been.
If you take the bias out of it all, what do you see?
I see a chart that broke below its 200-day, made a low, bounced, and failed to reclaim the 200-day and last week’s low. That’s the short story.
Now gapping down to the $427.50 area in the pre-market, we must see if the SPY can hold the Q4 low at $426.36. If it can, bulls will be looking for a bounce, first to the 50-week, then last week’s low.
If it can’t bounce, this week’s low may be in play and if that’s the case, the selling pressure will have to escalate to get it there.
Nasdaq - QQQ
The Nasdaq is even worse. See if it can reclaim the Q4 low today on the back of Apple’s results.
If it can’t and selling pressure picks up, this week’s low could be in play.
Individual Stocks — TSLA, CAT, AAPL
We have been keeping things pretty light this week, with just a handful of trades. If that’s what it takes to win, then that’s what we’ll continue to do.
TSLA
Tesla is gapping down slightly on the day after falling 11.5% on Thursday. If it can gap down and preferably tag the 200-day, see if we can get a quick reclaim of yesterday’s low.
That could be an optimal R/R setup, especially if the overall market can rally too.
CAT
A similar setup with CAT, which is gapping down slightly after a top- and bottom-line beat. A break of this week’s low or tag of this area and a rebound up through the 50-day could get the stock moving higher.
A break of ~$204 that’s not reclaimed could put sub-$200 in play.
AAPL
Last but certainly not least is Apple, which delivered strong results on Thursday night. After eight straight daily declines, Apple is up slightly after earnings, but it’s gapping into this week’s resistance area, the 10-day moving average and just above last week’s low.
If it fades from here, don’t be too surprised.
I’m not an AAPL bear necessarily — in fact, it holding up and/or rallying would be a huge boost to sentiment and the Nasdaq — but we’re in a sell-the-news type of environment right now.
Let’s see if it can finish green on the day.
Go-To List: Keeping It Short
NVDA — again — One to watch for stabilization around the 200-day
PG — keep an eye on Wednesday’s and last week’s low ($156.38 and $156.04, respectively). PG gave us a nice trade last week, can it again? Wednesday’s low comes into play near the 50-day. An undercut and reversal could be a good R/R.
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!