Too High to Buy, Too Strong to Short | Trading TSLA, AVGO

We're in a thin-to-win type of tape.

Technical Breakdown 

• NYSE Breadth: 67.4% upside volume

• NASDAQ Breadth: 54% upside volume 

Breadth was surprisingly low for yesterday’s robust rally and we’re now getting into one of those areas where the market is too high to buy but too strong to short. 

In those scenarios, there are only one of two things to do. One is to ride existing longs if you have them. The other is trade with smaller size. In both cases though, it leaves us looking for a buyable dip. 

The Game Plan

We are off to a great start for the week. We had that killer rotation trade in AMD, which rallied 5.6% yesterday and is up another 1% in pre-market trading. 

Like I said earlier this week, the newsletter will be intentionally light as we look to ride the last of our 2021 longs and recharge a bit going into the new year. 

S&P 500 Futures

ES Futures Daily | Click to Enlarge

A friend of mine said it a few weeks ago and it’s had me thinking: Where would the S&P 500 be without all the headlines? 

The negative news earlier this month caused several false starts in the overall trend. But each dip found support and the S&P 500 is finally at new highs once again. I would love to see a dip to the 4740 to 4750 area hold as support for the ES futures. 

Otherwise, I am keeping my longer-term focus on the 161.8% extension. An overshoot could put ES 5000 in play. 

If 4740 fails as support, we’ll need to see the 50-day hold. 

Nasdaq

NQ Futures | Daily

As for the Nasdaq futures, let’s see if the NQ can get back to the prior high at 16,767. 

After such a robust run, it makes you wonder if or when they will pull the rug. We’ll see how the overnight gains are handled after 9:30 and a day of rest would be normal after a strong rally on mild breadth. 

But we’re also on a low volume, thin-to-win tape right now. 

Keep in mind, Apple is nearing the $3 trillion market cap again. If bulls want to gun it to that level, it very well could take the NQ along for the ride. 

Individual Stocks — TSLA and AVGO

Without sounding like a prick, we nailed yesterday’s trade in AMD and that has us riding into the week on a high note and in a position where we don’t have to get our hands too dirty. 

Put another way, we have gains to keep rather than losses to make up and that means we really can afford to watch pitch after pitch go by without swinging at anything but the best. 

For many traders, hitting a one-day 5% trade that we can trim and trail is enough for a week like this to be a success. If that’s you, there’s no shame in enjoying the time between Christmas and New Years. 

Tesla