This Stock is Breaking OUT RIGHT NOW

Summary

In this video, Josh provides a comprehensive analysis of current market trends, including insights on key stocks like AMD, Nvidia, Meta, and Lemonade. He discusses patterns such as island candles and ascending channels, offering key support levels for the SPY and forecasting potential market pullbacks. Josh emphasizes disciplined trading, including the importance of using stop-losses, managing position size, and staying patient. He also shares a bullish outlook on Lemonade and Meta, advising caution while watching for potential rebounds. Throughout, Josh stresses the value of chart analysis and a methodical approach to trading.

Takeaways

• 😀 The Dow closed up 200 points, but the market remains in a potential danger zone with risks of a pullback and correction.
• 😀 AMD's recent bullish move was seen as an overreaction, but Nvidia's downturn highlights the current uncertainty in the market.
• 😀 The SPY chart is showing an island candle pattern and an ascending channel, which suggests that the market could face further downside if these patterns break.
• 😀 Key support levels for the SPY are at 672, 662, and 653, with the 653 level being the most critical support before a potential major downturn.
• 😀 Meta is currently under its 200-day moving average, which historically has been a key buying signal, but it's not yet time to jump in—wait for confirmation.
• 😀 Lemonade is an outlier, performing well despite broader market weakness, with a breakout move and significant price action, making it one to watch for further gains.
• 😀 The market is in a state of unpredictability, with some sectors like big tech showing mixed results, and investors should be cautious while looking for a bottom in the SPY.
• 😀 Patience and discipline are crucial in trading, with a focus on sticking to the plan, using stop losses, controlling position sizes, and not overtrading.
• 😀 Stock picking in this environment requires identifying potential breakout stocks like Lemonade, which has shown strong recent performance despite market trends.
• 😀 In the current market environment, it's important to focus on the charts, which provide the clearest signals for predicting price movement and making informed trading decisions.

Q & A

What is the significance of the 'island candle' pattern mentioned in the video?

The island candle pattern occurs when a cluster of candles forms at the top of a bullish move, followed by a gap down. This creates an isolated group of candles, resembling an 'island.' It’s considered a bearish signal, indicating that a reversal could be coming, especially when found at the peak of an uptrend.

What does the speaker mean by 'outlier' stocks, and how does it apply to Lemonade?

An outlier stock refers to one that behaves differently from the broader market. In the context of Lemonade, despite the market pulling back, Lemonade has shown strong performance, making it an outlier. It’s a stock that is moving higher when most others are falling, and it could present a good opportunity when the market turns bullish again.

Why does the speaker suggest caution when considering Meta as a potential buy?

The speaker advises caution because Meta is currently trading below its 200-day moving average, which historically signals that the stock may take time to recover. While Meta has shown potential in the past when trading below the 200-day, it usually takes about 4-6 weeks of sideways movement before a significant rebound occurs.

What role does the SPY play in the analysis, and what are the key support levels?

The SPY, or S&P 500 ETF, is used to track the overall market trend. The speaker analyzes the SPY chart to highlight important support levels where the market could potentially bounce or break down further. Key levels to watch are 672, 662, and 653. If the market breaks these levels, it could signal further downside risk.

What is the significance of the 200-day moving average for blue-chip stocks like Meta?

The 200-day moving average is a key technical indicator for long-term trends. When a blue-chip stock like Meta dips below this level, it can signal an opportunity to buy, as such stocks often recover strongly. However, the speaker cautions that it may take some time for Meta to recover above the 200-day moving average, and patience is necessary.

How does the speaker define 'discipline' in trading, and why is it important?

Discipline in trading involves sticking to a clear plan and strategy, rather than reacting impulsively. The speaker emphasizes the importance of trading with a plan, using stop-loss orders to protect investments, controlling position size to manage risk, and avoiding overtrading or revenge trading after losses.

Why is the speaker skeptical about the market’s ability to move higher in the short term?

The speaker suggests that while the market has been moving up since April, there isn’t a strong catalyst for continued gains in the short term. With uncertainty around the market, the desire to lock in profits outweighs the appetite for new risk, making it more likely that the market will experience a pullback before a potential bullish move.

What does the speaker mean by 'trade the trend' and how does it apply to current market conditions?

Trading the trend means aligning your trades with the prevailing market direction. In this case, the macro trend remains bullish, but the micro trend is in a pullback. The speaker suggests that traders should be mindful of this pullback and focus on making trades that are in line with the overall trend, rather than trying to go against it.

What are the risks of investing in small-cap stocks, as mentioned in the video?

Small-cap stocks often face greater volatility and can be risky because they may not have consistent revenues or market share. These companies might rely on raising capital through diluting shares, which can negatively impact the stock price. Therefore, the speaker advises controlling position size when trading small-cap stocks and ensuring more capital is allocated to long-term investments.

What is the target range for Lemonade's stock price, and how is it performing relative to the broader market?

The target range for Lemonade’s stock price is between $86 and $95, as the stock is currently in an ascending channel. It has been performing strongly, up 112% year-to-date, and is an outlier compared to the broader market, which is experiencing a pullback. The speaker suggests looking for a small pullback to VWAP for a possible buying opportunity.