Bearish Market - Trades For Monday 08-04-24

Summary

In this weekly trading video, Pete Sters reviews his past stock picks, discusses market analysis, and shares systematic trading approaches. He advises on day trading due to an anticipated market inflection point, cautioning against swing trading without technical confirmation. Sters emphasizes the importance of adapting to market conditions, using trend lines and indicators like the RSI for entry and exit points. He also provides specific stock examples, such as ULA, COST, RTX, and MC, detailing their performance and potential future trades. The video concludes with a strategy for identifying short-selling opportunities in a declining market, focusing on stocks with significant breakdowns and resistance levels.

Takeaways

• 📈 The speaker emphasizes the importance of reviewing past picks and not just presenting new ones, ensuring that the audience can see the performance of their trades over time.
• 📉 The speaker has been encouraging day trading due to an anticipated market inflection point, advising against long-term swing trades until technical confirmation is evident.
• 🛑 The speaker warns of the potential risks of relying on bullish trades without adjusting portfolios and trades in response to market changes, highlighting the importance of reducing long exposure during a pullback.
• 📊 The speaker discusses specific stock picks, such as ULA and COST, providing analysis on their recent performance and future predictions based on technical indicators and market trends.
• 📉 The speaker mentions a preference for short positions in certain stocks like Costco, based on bearish patterns and the belief that there's room for these stocks to decline further.
• 💡 The speaker highlights the significance of watching market reactions to earnings reports and economic indicators, using these as cues for trading decisions.
• 📊 The speaker provides a detailed analysis of the market's technical levels, including trend lines and moving averages, to predict potential support and resistance areas.
• 🚫 The speaker advises against taking swing trades without clear signals of market direction, emphasizing the need for caution and waiting for confirmation of market trends.
• 📈 The speaker suggests that after a significant market pullback, there may be a short-lived reprieve or bounce, but anticipates a continued downward trend towards the 200-day moving average.
• 📉 The speaker discusses the impact of mega-cap tech stocks on the market, noting their recent negative earnings reactions and the potential implications for the broader market trend.
• 🗓️ The speaker anticipates a seasonally bearish period for the market in the coming months, influenced by factors such as election uncertainty and a news vacuum, advising traders to be prepared for a choppy market.

Q & A

What is the main difference between the approach taken by the speaker and that of 'Internet gurus' when giving stock picks?

The speaker emphasizes accountability and follow-through, stating that unlike 'Internet gurus' who may give a pick and then not discuss it further, they review every single pick they've made, showing how it has performed and providing updates while the opportunity to act is still available.

What is the speaker's view on the importance of technical confirmation before starting bearish swing trades?

The speaker believes that technical confirmation is crucial before entering into bearish swing trades. They have been encouraging day trading instead of swing trading until such confirmation is evident, to avoid premature entry into the market.

How does the speaker describe their approach to teaching trading strategies?

The speaker teaches trading strategies through a systematic approach, which includes reviewing past picks, market analysis, and finding new trades. They also encourage viewers to watch their videos from the 2008 financial crisis to understand the validity and time-tested nature of their teachings.

What was the speaker's strategy for the last few weeks in terms of trading advice?

The speaker had been encouraging day trading for the last few weeks due to an anticipated market inflection point. They advised against swing trading until there was clear technical confirmation, aiming to provide lead time for adjusting portfolios and trades.

What is the significance of the stock 'Ula' mentioned in the script, and what does the speaker suggest about its performance?

'Ula' is a stock short pick given by the speaker about a week and a half ago. The stock had broken down below a major horizontal support level, and the speaker reviewed it in recent videos, still favoring the short position as it had digested some losses and then experienced renewed selling pressure.

What is the speaker's view on 'Costco' (COST) as a short and why?

The speaker sees Costco as a potential short. They highlighted a bearish engulfing candle on the stock chart, indicating a likely downward move. Despite the stock being relatively stable due to its nature as a consumer defensive stock, the speaker anticipates another leg lower, possibly to the 100-day moving average.

What trading strategy does the speaker suggest for the stock 'RTX'?

The speaker suggested 'RTX' as a long position, citing it as an example of a stock that showed relative strength during market selloff. They mentioned the importance of having both longs and shorts in a day trading strategy, especially during periods of intraday volatility.

What is the significance of the 'HWM' stock mentioned in the script, and what trading actions did the speaker take?

'HWM' is another long pick highlighted by the speaker during a live event. Despite the stock opening below the average volume weighted price (AV WAP) on Thursday and Friday, the speaker took advantage of day trading opportunities and set an alert for a potential entry off a bounce based on the LSI indicator.

What is the speaker's view on the current market conditions and their implications for trading?

The speaker believes that the market is entering a soft patch, with mega cap tech stocks showing negative earnings reactions and economic indicators pointing to potential recession. They suggest that traders should be in cash for now, waiting for clear signs of market direction before entering swing trades.

What advice does the speaker give for identifying potential short positions in the market?

The speaker advises to look for stocks that show relative weakness, especially those that have displayed recent relative weakness. They suggest waiting for the market bounce and observing if resistance levels hold, which would indicate a good entry point for short positions.

What is the speaker's outlook for the market in the next few months, and how should traders adjust their strategies accordingly?

The speaker does not expect a significant market rally in the next two to three months due to factors like election uncertainty and a potential news vacuum. They recommend traders to be cautious, use high implied volatility for selling out-of-the-money bearish call spreads, and consider buying deep in-the-money put premiums for swing trading.

Outlines

00:00

📈 Weekly Market Review and Trading Philosophy

The speaker emphasizes the importance of reviewing past trading picks and not just presenting new ones. They outline their systematic trading approach, which includes market analysis and finding new trades. The speaker encourages viewers to subscribe and like their content to reach a wider audience. They discuss the recent market conditions, suggesting that it's more suitable for day trading due to an anticipated market inflection point. They also mention specific stock picks, such as ULA and COST, and provide updates on their performance, highlighting the importance of not taking their word for it but to verify through past videos.

05:02

📉 Technical Analysis and Trading Adjustments

The speaker discusses their upcoming break and the importance of the instructions given in the video due to their absence. They analyze specific stocks, such as HWM and MC, detailing how to trade them based on technical indicators and support/resistance levels. They also explain how to set alerts for potential trading opportunities using indicators like the RSI. The speaker provides insights into market behavior after significant selling and the importance of recognizing bounces and retracements in the market.

10:02

🌐 Impact of Mega-cap Tech Earnings on Market Trends

The speaker reviews the performance of mega-cap tech stocks following their earnings reports, noting a general trend of decline. They discuss the broader market implications, including increased bearish sentiment post-earnings. Economic indicators such as ISM Manufacturing and ADP job numbers are highlighted as showing weakness, contributing to recession concerns. The speaker also touches on the psychological aspects of market behavior, such as dip buying and the potential for a market decline.

15:03

📊 Market Outlook and Economic Indicators

The speaker provides an outlook for the market, suggesting a period of potential decline influenced by economic data and the behavior of mega-cap tech stocks. They discuss the importance of watching economic releases like the jobs report and initial jobless claims, which may indicate a weakening employment picture. The speaker also mentions the impact of the Federal Reserve's statements and the potential for a rate cut, as well as the market's seasonal tendencies during the summer months.

20:03

🚀 Swing Trading Strategy Amid Market Volatility

The speaker outlines a swing trading strategy for a market that is expected to experience volatility. They discuss the importance of staying in cash during uncertain times and the potential for taking short positions once the market shows signs of struggle. The speaker advises on how to add to short positions at key resistance levels and the importance of identifying market patterns that suggest a struggle to advance.

25:05

📉 Trading Through Market Resistance and Support Levels

The speaker discusses how to identify and trade through resistance and support levels during a market downturn. They emphasize the importance of taking profits on significant drops and reloading on bounces, as well as the benefits of trading options during periods of high implied volatility. The speaker also provides guidance on how to manage trades and expectations in a market that is expected to be choppy and bearish over the next few months.

30:05

📈 Market Bounce and Short Selling Opportunities

The speaker provides guidance on identifying stocks to short sell following a market bounce. They discuss the importance of finding stocks that show relative weakness compared to the overall market strength, especially those that have broken key technical support levels. The speaker also mentions the significance of watching for economic indicators and how they can influence market direction and trading opportunities.

35:07

🛑 Trading Caution and Strategies for Market Downturns

The speaker offers a cautionary approach to trading during a market downturn, advising on how to identify stocks that are likely to continue their decline. They discuss the importance of watching for stocks that do not bounce significantly with the market and have broken key resistance levels. The speaker also provides examples of such stocks and how to set up trading alerts for potential short selling opportunities.

40:10

📊 Post-Earnings Analysis and Trading Stock Breakdowns

The speaker analyzes stocks that have recently reported earnings and have shown significant breakdowns in their price action. They discuss the importance of watching how these stocks behave post-earnings and how to trade them based on their technical levels. The speaker provides specific examples of stocks like Micron and Dell, detailing how to identify entry points for short positions and the importance of avoiding trades around earnings announcements.

45:13

🚀 Final Trade Ideas and Market Expectations

The speaker concludes with final thoughts on trade ideas and market expectations. They discuss potential strategies for trading the market's bounce and identifying stocks with high implied volatility for option trading. The speaker also provides specific examples of stocks to watch and how to structure trades using bearish call spreads and in-the-money puts. They remind viewers to subscribe and turn on notifications for future content and updates.

Keywords

💡Systematic Trading Approach

A systematic trading approach refers to the use of a defined set of rules or a model to make trading decisions. In the context of the video, the speaker emphasizes the importance of this approach in finding new trades and demonstrates its effectiveness through a review of past picks. This approach is integral to the video's theme of providing a reliable and consistent method for trading.

💡Inflection Point

An inflection point in trading is a moment when the trend of the market is expected to change direction. The speaker mentions that they have been encouraging day trading due to an anticipated inflection point, indicating a shift from bullish to bearish market conditions. This concept is crucial for understanding the timing of trades discussed in the video.

💡Holding Up

In the script, 'holding up' refers to a stock or market maintaining its value or not declining significantly despite a broader market downturn. The speaker uses this term to describe certain stocks that have remained stable during market declines, such as Costco, which is a defensive stock and thus less affected by market volatility.

💡Breakdown

A breakdown in trading terms is when a stock or market falls below a significant support level, indicating a potential for further declines. The speaker discusses specific stocks, such as ULA and MC, that have experienced breakdowns, using this concept to highlight potential short-selling opportunities.

💡Relative Strength

Relative strength is the measurement of how a stock performs in comparison to a benchmark or the overall market. The speaker mentions RTX as an example of a stock that has shown relative strength during market sell-offs, which is a positive signal for potential long positions.

💡Gap Reversal

A gap reversal occurs when the price of a stock moves in the opposite direction after a gap up or down. The speaker refers to a gap reversal in the context of a stock that opened significantly lower than its previous close, which is a bearish signal and might indicate a good opportunity for short trades.

💡Support and Resistance Levels

Support and resistance levels are price points in a stock's trading range that are characterized by either a tendency not to be exceeded (resistance) or a tendency not to be跌破 (support). The speaker discusses the significance of these levels in determining entry and exit points for trades, using automated trend lines to identify them.

💡Bounce

A bounce in trading refers to a recovery in price after a decline. The speaker uses the term 'bounce' to describe situations where the market or a stock recovers some of its losses, which can present opportunities for traders to take profits or adjust their positions.

💡Mega Cap Tech Stocks

Mega cap tech stocks refer to the largest technology companies by market capitalization, such as Tesla, Google, Microsoft, Amazon, and Apple. The speaker discusses the performance of these stocks after their earnings reports, noting their significant impact on the overall market direction.

💡Economic Releases

Economic releases refer to the data or reports published by government or private agencies that provide insights into the health of the economy. The speaker mentions several economic indicators, such as ISM Manufacturing and ADP job numbers, which have influenced market sentiment and trading strategies.

💡Swing Trading

Swing trading is a trading strategy that involves holding positions for several days to weeks, aiming to capture gains from short-term price swings. The speaker advises on the approach to swing trading in the current market conditions, emphasizing the importance of staying in cash and waiting for the right opportunities to short the market.

💡Option Implied Volatilities

Option implied volatilities represent the market's forecast of a likely movement in a stock's price and are a key factor in option pricing. The speaker discusses how increased implied volatilities during market sell-offs can benefit traders, especially when selling out-of-the-money options.

💡Bullish Engulfing Candle

A bullish engulfing candle is a candlestick pattern that indicates a potential bullish reversal, where a large green candlestick (or a long day) follows a small red candlestick (or a short day). The speaker mentions this pattern in relation to Costco, suggesting it as a signal for a potential price decline.

💡Long Exposure

Long exposure in trading refers to the amount of a trader's portfolio that is invested in long positions, expecting the market or stock prices to rise. The speaker advises reducing long exposure in anticipation of a market pullback, which is a strategy to manage risk and prepare for potential declines.

💡Watch List

A watch list in trading is a curated list of stocks or other securities that a trader is monitoring closely for potential trading opportunities. The speaker encourages the development of a watch list based on the picks provided in previous videos, which can be reviewed and acted upon when the market conditions are right.

Highlights

The video emphasizes the importance of reviewing past trading picks to demonstrate their performance over time, rather than only presenting new picks.

A systematic trading approach is used to find new trades, which includes market analysis and is validated through videos dating back to the 2008 financial crisis.

The speaker encourages day trading due to an anticipated market inflection point and advises against swing trading without technical confirmation.

A watch list should be developed based on provided picks to prepare for potential market pullbacks and identify opportunities.

The stock 'Ula' is highlighted as a short pick with a breakdown below a major horizontal support level, demonstrating the speaker's analysis of stock performance.

Costco ('Cost') is discussed as a potential short, with a bearish engulfing candle indicating a likely downward move, despite its status as a consumer defensive stock.

The video mentions 'RTX' and 'HWM' as long picks, showcasing the speaker's strategy of balancing long and short positions amidst market volatility.

The impact of mega-cap tech stocks on the S&P 500 is discussed, noting that their performance is a key driver of market direction.

Economic indicators such as ISM Manufacturing, ADP, and the jobs report are analyzed for their influence on market sentiment and potential recession fears.

The speaker outlines a trading strategy for mega-cap tech stocks post-earnings, focusing on identifying support and resistance levels for potential trades.

The FED's statement and its implications for market expectations are discussed, noting the lack of new information and potential for increased market nervousness.

Seasonal trends in the market are highlighted, with August through October being typically bearish and the upcoming news vacuum affecting market liquidity.

The speaker provides a detailed analysis of trading opportunities post-earnings, focusing on technical indicators and market sentiment.

The importance of identifying market struggle points and transitioning to cash is emphasized for effective swing trading.

A trading strategy for the next few months is proposed, focusing on short positions and the use of technical analysis to identify entry and exit points.

The video concludes with a reminder to subscribe for continuous trading ideas and education, and an invitation to participate in live events for real-time interaction.

Transcripts

hello Traders it's Sunday August 4th and

it's time for our weekly video you know

you've got a lot of Internet gurus out

there who give you a pick and then you

don't hear from them you don't know how

the pick did that's how this is

different I don't do that I go through

every single pick that I've made

previously and I show you how it's

performed I give you that pick when you

still have time to act on it I'm not

showing you a photoshopped p&l I'm

giving you an actual trade then once we

review our picks we do our market

analysis and then we use our systematic

trading approach to find new trades

that's how all of this works and you can

go back and watch my videos since the

financial crisis in 2008 and see that

what I'm actually teaching you is valid

it's time tested it works week in and

week out if you like the content that I

produce please give me a thumbs up

subscribe to my YouTube channel all of

this helps the algorithms and it helps

me reach a larger audience because

ultimately that's what I'm trying to do

I'm trying to teach you how to trade so

you know that for the last few weeks

I've been encouraging you to day trade

because I felt that the market was

coming up on an inflection point we

really didn't want to do a lot of Swing

trading we needed technical confirmation

before we could start getting into some

longer term bearish swing trades we'll

get into the market analysis in just a

little bit but I know how all this works

I only do a couple of videos a week and

by the time you're able to watch those

videos there's a lag so if I'm coming

out with bullish trades and bullish

trades and bullish trades when the hurt

finally comes you're going to be stuck

because I've been giving you bullish

trades so instead I'm trying to give you

some lead time to make sure that you're

adjusting your portfolios and your

trades and you're reducing your long

exposure eventually when we get the

pullback you're going to have a lot of

stocks that you can take a look at

because you'll have developed a watch

list based on the picks that I've given

you so please again don't take my word

for it go back and watch my videos from

two three four weeks ago and get a feel

for the warning signs that I was already

seeing in the marketplace

Ula that's a short that I gave you about

a week and a half ago that was during

one of the Live Events and you can see

how the stock had broken down this was a

break down below a major horizontal

support level and then it

compressed in my most recent videos I've

reviewed the stock and I've told you I

still like the short it had to digest

some of these losses and then bam the

sellers were right back again this week

so that's performed well uh uh a week

ago I showed you cost Costco the stock

has been relatively weak I love this

long bearish engulfing candle here that

told me that the next move in the stock

was going to be lower you can see how

the stock sold off and then it

compressed had to digest some of these

losses eventually the sellers were able

to knock it down again and then it's

compressed I still like Costco as a

short I believe it's going to have

another leg lower perhaps down to the

100 day moving

average I do feel that right now we're

seeing a little bit of a flight to

Quality after this market decline that

we saw this week CCO is a relatively

stable stock because it's a consumer

defensive stock these are not typically

Big Ticket items for Costco people are

buying groceries and such so it's going

to hold up relative well but I am

looking for it to Stage its next leg

lower I've also mixed in a couple of

Longs in there so we'll take a look RTX

was a long that I gave you about a week

ago I'd mentioned we're day trading lots

of intraday volatility so it's good to

have some Longs and some shorts and you

can see this is what relative strength

is all about this is the market this is

the daily chart of the market here here

you can see Heavy selling in the S&P 500

what has a stock done during this

selloff it's continued to move higher

hwm was another long that I highlighted

during the live event this week mind you

during a live event we were pre

fomc we were pre Amazon we were

preapp we were pre jobs report lots and

lots of information coming out this week

so I was not willing to commit to one

side or the other on a swing trading

basis but that's about to change so make

sure that you watch the rest of this

video I'm going to be taking some time

off so I'll be doing this video I'll do

a live event Wednesday and then I'm

going be off for about a week or so so

the instructions that I give you in this

video are going to be very important

because they're going to have to serve

you for about another 10 days days so

you can see how

hwm held up well until

Thursday Friday morning we get this open

below AV wape and we already know that

when we have a stock that's reported

earnings we need to give it four five

six days maybe even two weeks to let it

kind of digest these gains but there

were some nice opportunities to day

trade that when we did the live event on

Wednesday Wednesday so I'm going to take

a look at Wednesday's price action live

event took place in here stock did have

a nice move higher and then it closed a

little bit lower but you can see even

Thursday nice opportunity to take some

gains and now you get into a little bit

of a gap reversal in here there's no

reason to day trade this stock from the

long side MC in the Wednesday live event

was a short that I gave you so let's

take a look at MC let's see what

unfolded I'll tell you how I traded it

so we had this nice decline in MC on

Wednesday and the live event came out

somewhere about in here and you can see

how the stock continued to move lower

closing on its low so from the time the

live event was put out uh I know I was

trading the uh August puts and those

were the 115 puts those are somewhere in

the

$280 level when we started the live

presentation and by the

low this was on Thursday morning I

exited them at about

$370 that was a nice trade a good winner

after a couple of heavy days of selling

you can expect that the stock is going

to find some support that's a theme

you're going to hear a little bit about

in just a second when we're talking

about the market so in any event yes

Merk did bounce so you had to take some

gains take a look at the daily chart

here and you can

see big heavy selling after

earnings big follow through selling well

this is what we were taking advantage of

Wednesday and Thursday morning so you

got to take some gains along the road

and you can see that we had a

major long-term trend line

boom boom boom that we were bumping up

against these are our automated trend

lines I would pay attention to them

they're very important especially one

that's that long term so look at where

the stock bounced huh I wonder if these

trend lines are valid so these are all

automated they make it very easy for you

to see where these major support and

resistance levels are coming in these

are significant level so you get the

stock bouncing this is Av WAP right here

and you can see that it's going to hit

some resistance there's the 200 day

moving average it's going to hit a

little resistance around this AV WAP e

the news was not good for the company

they lowered guidance so I would like

another bite from this apple because

this is a major technical breakdown what

would I do how will I know well I can

use a couple of other indicators like

let's say

LSI and I'm going to put that on the

chart and I'm going to go into maybe a

30 minute basis just a little bit longer

term what I'd be looking for is a

breakdown below 80 because that's how

you trade L RSI and right now that

signal would have come through and this

would tell me that yeah you'd want to

evaluate this stock for a potential

entry off of a bounce there's your

bounce

that now the stock is starting to weaken

and it could move lower so one thing I

can do here is say yeah you know what

the stock held up pretty well on Friday

Market had really really weak price

action but the stock held up strong so

maybe I'm a little bit early on this

short so instead of taking a position

I'm going to double click on the low of

that bar right there and I'm set an

alert if the stock rolls over I've

already got lrs

going my way on a 30 minute basis if it

breaches the support level yeah the

sellers might be back but after big

selling like that and big follow through

selling like that and follow through

selling on Thursday it's not going to go

down forever you're going to get a

bounce in there somewhere shorts are

going to take profits buyers might

nibble a little bit so you can expect

these retracements but longer term this

stock wants to go down so set some alert

alerts I can also go into an H1 basis

take a look at that and go oh look LSI

is still well above 80 so why don't I do

this if I want to have an alert I'm

going to create an

alert based on

LSI being below 80 so I'm going to click

that below 80 on an H1 basis click that

less than sign right there add it

now I'm going to get an alert if this H1

goes back below 80 that would be a

legitimate cell

signal and I don't have to act on the

signal right away but what I want to

evaluate is what happened on that bounce

how tall was that bounce did I see any

heavy volume and stack green candles

that might be a warning sign that hey

this stock still has more upside to it

or was the bounce weak shallow wimpy

mixed overlapping candles what was the

bounce like that's where I'm getting my

information from that's the clue I

already know blam sellers are there what

did the bounce look like is it time to

get

in so I set my alert and I'm going to be

going to be evaluating it I'm going to

be evaluating the market as well so

let's go in let's talk market we've been

waiting for this news and we knew that

there was a major window that was

approaching and that window was this

week Mega cap tech stocks we had a

couple of them the previous week super

super important so let's go through a

quick rundown of Mega cap Tech and how

it did Tesla down after the number

Google down after the number Microsoft

down after the number Amazon down after

the number Apple down after the number

the only one that was up after the

number was meta and that gave a lot of

its gains back so as one piece of the

puzzle that we're looking for which is

earnings mind you when the market was

rally rally rally mode for

the

last six months actually probably the

last eight 10 months since November

scroll out that was November you can see

the powerful rally that we

had it was all driven by MEAP tech

stocks 60% of the gains this year had

come from six or seven stocks in the S&P

500 and they comprise about

25% a quarter of the S&P 500 so when you

talk about gee what would be important

during earning season what would really

drive the market what would excite

investors it would be if Mega cap tech

stocks actually

outperformed well good results have been

priced in and there's been a lot of

excitement over AI valuations are

stretched that means that there's some

room on the downside so any kind of fear

that short sellers would have had before

Mega cap Tech earnings

releases waned very quickly and they

were going to wait for these tech stocks

to report because they didn't want to

stick their head in that news but once

all the mega Camp tech stocks have

reported shorts could get much more

aggressive and especially when almost

all of them had negative earnings

reactions

so now you've got Mega Camp tech stocks

out of the way what happened on the

economic front we had a ton of economic

releases this week we had ISM

Manufacturing weaker than expected in

fact haven't seen a weak level like that

for quite a while I believe it was the

lowest level of the year

46.8 that's contraction territory ADP

how did that come out well ADP I believe

the number was somewhere in the

122,000 range much softer than expected

so job growth in the private sector was

starting to

slow we also had the jobs report on

Friday much weaker than expected I think

it was 114,000 if my memory serves me

much lower than the

172,000 that everyone was expecting so

now all of a sudden where the economic

releases had been chug chug chugging

along everything was looking pretty good

now all of a sudden everyone's fearful

that hey we could be going into a

recession the unemployment rate is

starting to spike here we did have a

couple of Clues we had initial jobless

claims came in at 245,000 so that's just

a weekly number and we get these weekly

numbers constantly

that was the highest level that we've

seen this year

uhoh little bit of a warning sign maybe

so we're starting to see the employment

picture Wayne and that Beed out in the

jobs report on Friday now in the initial

stages of a market decline when you have

this type of trend strength buyers have

been conditioned by the dip by the dip

by the dip so there will be a little dip

buying in here now that we've tested the

100 day moving average but for me there

is a pretty good tell and it was right

in here when we had the 50-day moving

average that we had poked below okay so

now we've had a decent little pullback

we're looking for a bounce this week

again we have been day trading for about

the last 3 weeks with fantastic intraday

ranges there was no reason to take any

overnight risk let's wait and see if my

thesis was right that the market could

possibly be rolling over so we're in

wait and see mode and you can see how we

had this test of the 50-day moving

average and a really pretty substantial

bounce on Wednesday and then we also had

the fomc statement which was kind of a

nothing Burger on Wednesday but I think

the real selling started to come through

Thursday and Friday especially after

those Mega cap Tech earnings releases so

what did the FED say well the FED said

you know economic growth seems pretty

stable right now and they didn't really

give anything new for us to sink our

teeth into the market has been waiting

for a rate cut in September and the FED

certainly didn't give the market any

warm fuzzies to latch onto the FED is

going into recess for the next month and

a half Washington DC is going into

recess for the next month so who's

minding the

shop

nobody well the market gets nervous over

all of that and August and September

even through most of October that is a

seasonally bearish period for the market

I also think that the election are going

to start Weighing on the market where it

seemed fairly certain that Trump might

win a few weeks ago the market Was

preparing for that and I'm not making a

political statement okay so just dispel

that but the market had some

certainty okay it looks like the

election is going to go this way right

now there's a lot of uncertainty all of

a sudden the polls have shifted and it's

more of a 50/50 proposition and I'm not

trying to predict

what the election is going to do or what

the election is going to be the market

trades off of uncertainty and there's a

bit more uncertainty in terms of the

elections in terms of where interest

rates might go in terms of economic

growth in terms of earnings all of that

is starting to weigh on the market and

it happens in August September October

most years the other thing that you have

coming into play right now I've also

mentioned this recently is we're heading

into a news

vacuum this was the last really big

piece of news that we're going to have

for a while and so whatever happened

this week whatever result we had up or

down is going to impact the market for

probably the next five or six weeks

Traders are going to take time off

because the market liquidity starts to

dry up the kids are going back back to

school we're kind of in the summer

doldrums there's no news to trade off of

earning season is starting to WAN so

we'll still get some pretty decent price

action this week so the bottom line is

that I'm expecting the market after a

decent little pullback like this I'm not

looking for the bottom to absolutely

fall out just yet and it may not do that

I'm also not looking for the market to

just absolutely crater and have like a

30% decline anything super nasty like

that I'll show you in just a second the

pattern that I think is going to unfold

but after testing the 100 day moving

average here's what I'll be looking

for and here's what I think we're going

to get we'll get a little bit of a

reprieve okay they're going to try and

bounce this thing after a really pretty

decent selloff and they're going to try

and get the market back to the 50-day

moving average but I think we're going

to find resistance there I'll certainly

be watching for it so let's get into a

little mentality here because this is

important so for swing trading I've told

you you've got to stay in cash right now

you should not have any swing exposure

because we don't know how this is going

to be resolved are we going to run right

back to the all-time high with ease if

so that puts us into a bullish Camp I

didn't feel that that was likely I

needed proof because I do not pick

Market tops that is the easiest and best

way to blow out your account so lots of

people looking for Market tops in here o

o there's a dip I'm going to get short

this is it I knew the market ran up so

far this is the big one and then the

market continues to go higher you get a

nice little pullback like this back in

April ooh ooh ooh o here it is by puts

by puts I knew this was a time sell in

May and go way uhoh uhoh uhoh uhoh they

had their ass handed to

them so for anybody that tells you their

super Guru right now that they knew the

market was going to roll over and I'm

Bel a lot of puts well this time they

could get lucky CU I think they're going

to be right back in here you didn't know

that so you didn't trade like that we

were trading like we were going to get a

bounce and we did and then we added here

and we watched to see what happened at

the breakout and we could have added

right in here but more likely in here so

we're still riding this light volume

rally higher but as we start getting

into these tiny compressed candles with

a major window that had a lot of news

coming out we went to the

sidelines and we waited okay so we

didn't start loading up on puts here

we're waiting to see is this thing going

to bounce now we finally got the

information we need everything is lining

up for a soft patch in the market so we

can finally start to swing trade now

here's the Dilemma for any of you who

might feel looking at this price action

the fact that we tried to bounce in here

and we got absolutely squashed on

Thursday with this long bearish

engulfing candle for those looking to

swing trade yeah you absolutely could

have gotten short on that you could even

be short in here

what do I do right now Pete can I short

this Market on a swing basis you

can

if you have the

wherewithal to take some heat and if you

feel that based on where the market

closed Friday that the Market's going to

minimum come down to a 200 day to the

200 day moving average between now and

the end of September end of October I

would would say you're right I agree

with you I think based on the price

action I've seen that we're going to be

able to reach that 200 day moving

average the problem is you mentally have

to be prepared for the market to get

back up to AV weap Q maybe even this

downward sloping trend line so if you

are a nervous Nelly Trader oh my God the

bounce it's killing me then you should

not be taking swing shorts until you get

some kind of a bounce in here but if

you're willing to weather that little

storm knowing that getting down to the

200 day moving average is very very

likely then take a starter position in

your shorts and know that you're going

to have to weather a bounce somewhere

along the line and when that bounce

comes and stalls below a technical

resistance level like this downward

sloping trend line AV weap Q 50 day

moving

average I expected this this is not a

bad thing it is an opportunity for me to

add to my short position is now I'm

confident we're going to hit the 200 day

moving average and now I've just got a

better entry point to add to my short

position but I have not loaded the boat

because I want to see that resistance

hold and I want to see the market start

rolling over and then when we take out

the 100 day moving average on the next

leg lower you can add again and add

fairly aggressively because now you've

got one position on another position on

and when you test that 100 day moving

average your average cost is way up here

so you have staying power and now we

take out another key support level now I

can add now I'm just adding and my

average cost is going to continue to be

way up here as I get that follow through

selling that's how you trade and that's

how you add to your trades and your

positions again the most important thing

is to be able to identify where the

Market's starting to struggle to advance

so then you go to

cash and it's a beautiful thing some of

you have been so PTI

hats off to you I've been telling you

this for a few weeks a lot of people

don't listen to me but some do and how

nice was that to start watching the

market come in and instead of fumbling

around and running around with your head

cut off wondering how you're going to

manage these losing positions and ah I

really can't take the loss right here I

needed that money whatever your mindset

is you got to take the loss in here you

should have been on the sidelines

instead of having that mindset you're in

a I got a lot of cash I've been waiting

for this pullback I'm going to be

waiting for really nice shorting

opportunities to set up so I kind of

talked about the person with the mindset

who's able to take a starter short and

will be adding when that resistance

level is tested and rejected and adding

again it's the mindset you should all be

in from a swing trading standpoint but

there are going to be some of you who

don't have that Comfort level you need

to see a bounce okay well then here's

what you would be watching for if you

can't weather a bounce so you don't have

a position on watch for the 50-day

moving average to provide some

resistance and then avap Q so in this

area probably around the 540 level

that's where I'd be looking for the

market to maybe get back to and then to

take another leg lower that'd be an

excellent entry point for swing short

positions and then you would add on a

breakdown below the 100 day moving

average that

breakdown has got to be really hard so

we don't want to come down and poke poke

poke poke poke that's not how we want to

attack the 100 day moving average we

want to come down and absolutely

annihilate it obliterate it usually on

the first test you're going to get

bounces off of these major moving

averages so you want to make sure that

they're brief and shallow and when the

market kind of tests the upside so

they're testing the programs are testing

to see what's on the ask is there

anything there can we lift it very

easily or is it stubborn are they

replenishing the ask replenish ing

replenishing if they're replenishing the

ask that's selling pressure that's

telling them don't go there there's a

lid here the next move is down if they

can lift that ask then you got another

leg higher if that resistance

holds then they know okay that's it

that's as high as we're going to bounce

it was brief and shallow we're going

down there's a lot of selling pressure

so that's what the programs do out there

is they evaluate this so we want to see

resistance holding at the 50-day moving

average possibly at AV WAP q but yes

it's going to be time to start looking

for some short positions on a swing

trading basis now one more word of

caution and that is that when you get a

market that declines it comes in really

big spurts so you get this wave of

selling and then the market finds

support and you get a

bounce and then you start seeing a

series of lower highs good that tells us

wham wham wham resistance wham wham wham

resistance lower high couldn't even get

back to that previous High why is that

significant because the guys who were

selling like mad right here and that see

this little drop they're like oh my God

I really didn't get all my shorts off

and I wanted to sell more the people who

are along are also thinking gosh we've

got to get rid of as much stock as we

can to reduce our risk exposure now

we've got another little opportunity so

they keep the pressure

on little upward sloping trend line this

is where you want to short you've got

signs of resistance in here so on this

leg lower all right we found some

support we had a nice bullish Trend day

in here all right we might bounce a

little bit after a nice decline like

that so take profits on your shorts if

you are an option Trader you get the

double whammy hello thank you very much

when the market sells off like this the

bonus is option implied volatilities

explode they expand so you're making a

lot of money based on where you're put

is relative to the strike price and the

fact that the stock has fallen but

you're also benefiting from this

explosion in option implied volatilities

so don't wait for the bottom when you

get a nice really big drop like that and

especially when you get a nice bullish

Trend day take some money all right you

get another little chance here we get

another bullish hammer in here don't

wait around now you get the market

releasing and showing signs of

resistance this is where you reload on

your or put

positions you have

signs that resistance in a downward

sloping trend line is forming so you

reload here whoosh another big

drop take the profits expect a bounce

because this is a really big move in a

very short period of time look at that

right above the 200 day moving average

so you're taking taking profits here

again then when you get another bounce

you're waiting for signs of resistance

hey we're hitting resistance around the

50-day and the 100 day moving average

this all looks good ooh nice long red

candle through AV WAP Q all right this

might be another opportunity for me to

try some shorts so when you're trading

the short side big fast steep

drops take your gains wait for the

bounce

reload whoosh big selloff take your

gains especially on those major moving

averages wait for a bounce

reload those are your instructions for

the next two or three months I really

don't believe that we're going to see

much of a market

rally over the course of the next two or

three months I think through o uh

October just because of the election

uncertainty

we could see a fairly choppy Market

what's going to matter is what are the

economic numbers look like are we

continuing to see some softness so as

August unfolds watch those numbers

there's a big number coming out tomorrow

ISM Services 80% of our economic

activity is tied to the service sector

very important number if that number

comes in below 50 you're going to see

elevated concerns that we going into a

recession now ism is a really

interesting economic release to me

because it's a

survey they're service surveying

purchasing managers to find out what

their current intentions are for the

next month so it's extremely current

reading on what's Happening economically

watch that number tomorrow but then

that's really it we don't have too many

other major major economic releases for

the next few weeks so we'll see how that

comes out but even apart from ISM

Services number

tomorrow any

bounce is going to set us up with a good

entry point for shorts especially on

stocks that have relative weakness

especially on stocks that have display

play recent relative weakness so when

you get this Market bounce and those

resistance levels

hold guess what you're looking for in

the underlying

stock what do you think just try and

visualize what do you think you're going

to want in that underlying stock that's

showing so much

weakness you're going to want to see the

stock not bounce very much with the

market because then tells you that the

institutions are still in there wham

wham wham wham wham beating on that

thing they need to get out

okay if the stock does

bounce ideally it's broken some key

technical was

support now becomes resistance levels

and the stock can't get through that

resistance when the market is bouncing

so if that resistance is in place that's

going to be an excellent short so let's

go find some stocks again I'm giving you

the road map for the next few weeks okay

I'm going to be taking some time off

make sure to visit the live event that I

do with Harry on Wednesdays that'll be

another snapshot of what's unfolding

maybe just maybe we'll have a little

bounce in here and that'll give us that

entry point that we're looking for

so I'm going to go through I've already

spent a lot of time in this video I'm

going to go through and I'm going to

find some stocks I'm just going to go

into my red Royal Flush search and I'm

going to click through some daily charts

it's all I'm going to do it's so simple

this is one of my favorite swing trading

searches pop bear is another one I

haven't looked at that one so let me

just scroll through here visually and

see if we've got anything really

compelling that uh is jumping out at me

these are lot be really good stocks

they've all broken down take a look at Z

here uh afrm this has been a leaker just

gradual downtrend we're going to stick

with red Royal Flush go through the top

stocks here Amazon being one of the

first ones this is a pretty major

technical breakdown here you can see all

of our automated trend lines that have

been coming into play on this drop big

bullish hammer on Friday so the stock

dro dropped dramatically you can see how

that 200 day moving average is still

providing some resistance but after the

price action

Friday Market sold off finished near the

low of the day this stock actually

rallied most of the day you can see such

that early low when the market was

making new

lows making new

lows the stock had actually bounced and

was starting to try and fill in some of

this Gap that 200 day moving average is

going to provide some resistance so I

would not be looking for any Longs right

now I wouldn't be trading Amazon because

it has a chance to maybe get above that

200 day moving average but watch that

key critical level this is a significant

breakdown so I wouldn't be trading

Amazon right now it's just post earnings

I'd be waiting to see what happens GE

would be nice if it can get below the

100 day moving average you've got a nice

upward sloping trend line here's how I

address that I click GTC boom boom

double click on the low from Friday if

that's breached I'm going to get a trade

alert all right then it'll be of

interest to me Microsoft I talked about

the mega cap tech stocks Microsoft

there's your earnings announcement no

bueno it's really sold off hard it found

support at the 100 day moving average

average it's finding support on this

major upward sloping trend line so I

wouldn't be shorting Microsoft in here

because there's a good chance it might

bounce a little bit if it struggles to

get through the 100 day moving average

then maybe you've got a shorting

opportunity set alerts like the LSI

alert that I showed you earlier today

Micron beautiful nice clean breakdown

lots of room to the next upward sloping

trend line below the 100 day moving

average below the 200 day moving average

and I can tell you on June

20th I did a live event go back and

watch my video on June 20th I knew that

bearish engulfing candle on Micron now

it came before earnings was a sign that

this stock was heading lower and there's

your earnings announcement and it has

not been able to recover ever since

don't take my word for it go back and

watch

coin coin has a nice breakdown below

this upward sloping trend line here it's

below the 100 day moving average has

plenty of room to the 200 day moving

average

but it's been pretty resilient Stock's

holding up pretty well relative to the

blood bath that we've ' seen in many

other stocks oo like this one zoom out

take a look see where that long-term

trend line comes into play all right

it's breaching major trend lines mRNA is

below the 100 day moving average mRNA

didn't just poke the 200 day moving

average it blew through it on earnings

see you later on

Friday it's a nice short I like this

short what am I going to be looking for

I'm going to be looking for a little

bounce in the market off of The 100 day

moving average when I get that little

bounce in here I want to make sure that

mRNA is staying below AV WAP e and this

low post earnings right in here just

looking for it to

Reserve as much of this selloff as

possible so a little weep a little weak

whiy bounce is going to tell me that

sellers are still wham wham wham in

there selling it on the market bounce so

Market bounces most stocks should bounce

when the stock can't bounce and these

resistance levels stay intact

that's how we know we're going to have a

good entry for a longer term swing short

stock has a major breakdown lots of room

to fall okay I like it mRNA looks like a

really good short that could be one that

I would have for a bearish pick upward

sloping trend line right in here go back

and watch my video from two weeks ago I

know Dell was on it as a short with we

wanted to see a breakdown below the 100

day moving average it had already

breached that upward sloping trend line

and you can see how the stock has

continued to sell off below that 100 day

moving average now it's testing the 200

day moving average and look you there we

got a breakdown below it earnings coming

out though 829 so you still got plenty

of time I would watch that if it can't

get above the 200 day moving average on

any Market bounce this is going to be a

really good

short Dell could easily

be my short Pig and the nice thing too

is if you can try and find stocks that

have already announced earnings kind of

gone through enough but I'm going to be

looking

for H there there are a number of stocks

that I can highlight I'm GNA go into GM

for one reason and the reason is that

this stock has also broken a nice

horizontal support level and it was not

able to get above the 100 day moving

average when the market was bouncing

earlier this week just couldn't do it

there's your earnings

announcement you can see they didn't

like the earnings even though they beat

estimates and all stock continued to

sell off and it easily breached that 100

day moving average well if this was just

a head fake then buyers would have come

in and they would have scooped the stock

as soon as the market had a little bit

of upside to it but they didn't Market

sold off and then on Friday the stock

really got hit pretty hard you do have a

bit of a fundamental

twist to this play and that is that if

the economy is slowing down if people

are having difficulty finding work then

they're not going to be buying Big

Ticket items like cars and so that is

why GM is falling and it's got plenty of

room down to the 200 day moving average

so what I'd be looking for is a bounce

in the market and GM not not even able

to recover this entire red candle just

struggling struggling struggling if by

chance it fills in this little Gap right

in here H okay I guess that's tolerable

for me I'm looking for a longer term

swing short so we continue to get weak

economic numbers everybody's getting a

little bit nervous hey the fed's in

recess are they going to cut are they

going to stay in tightening mode you

know are they going to do anything with

quantitative tightening are they going

to miss the boat here are they going to

wait too long now there's a Jackson Hole

conference which they'll talk a little

bit about it but I don't know that the

fed's going to give any big Clues and

say yeah we're going to ease and right

now you'll get a little bit of a bounce

in the market on the notion that the FED

could ease this is going to increase

their likelihood to cut rates in

September so the bad news is good news

crowd will be out there going yay we

should get a rate cut be careful what

you wish for I've been saying this also

for a long time we don't want the FED to

cut rates because it means that the

economy is starting to soften what we

want is for rates to stay relatively

high and for economic growth to continue

and we got GDP at 2.8% very backwards

looking number very old number felt

pretty good when when the number came

out but that's the problem with looking

at GDP so now all of a sudden everyone's

thinking nah this is looking like we're

going to go into a recession so that is

going to be the fear hopefully the FED

will respond and cut rates I think

they'll have plenty of reasons to do it

and they've got lots of ammo they're in

the driver's seat right now because

inflation has started to come in so

they've got wiggle room this is they're

in a really good position and I think

that's what they're going to do in

September but hopefully between now and

then economic conditions don't

deteriorate too rapidly so tiny little

bounce when the market bounces we don't

want the stock to bounce and that's what

tells us that sellers in that stock are

still very aggressive they want to

unload shares and that gives us our

opportunity to enter the short at a very

good price on a swing trading basis so

what kind of time frame am I looking at

what would I want to be doing with my

shorts right now well if you have high

option implied volatilities with these

major resistance levels in place then

you're going to want to look for stocks

that have relatively High option implied

volatilities so let's say that you were

in looking to short Qualcomm well what

you can do on a swing basis you can see

there's the earnings announcement and

there's what the stock did after the

earnings announcement close below the

200 day moving average Market bounces

you're going to be looking for an area

where you can sell some out- of- the-

money bearish call spreads maybe keying

off of this 180 level if the stock can

bounce to

175 but you're going to be evaluating

that based on the option implied

volatilities if they're above 35 it's at

45 then you favor selling out ofth the-

money bearish call spreads because the

stock will be more vol volatile it'll

move farther you want to distance

yourself from the action take advantage

of accelerated time premium Decay and

you want to be selling those with three

or four mon three or four weeks left

until

expiration so that's one way that you

could approach this fairly passive great

way to swing trade higher option implied

volatilities look for those resistance

levels that the stock would have to get

through and sell out of the money

bearish call spreads you want to make

sure that the company is announced

earnings we do not want to sell these

and have that spread span an earnings

announcement no bueno bad move horrible

move okay so make sure that you don't

have earnings coming up on those types

of stock plays the alternative is that

you would be looking to buy deep in the

money put premium with two or three

months worth of life where the stock has

it it's so far in the money that the

options are trading at a Delta of say 7

or so so you buy those options almost

like a surrogate stock position short

stock position and you just wait for the

stock to continue to drift lower that's

the other way that you can be shorting

on a swing basis so as you go through

and start taking a look at some of these

shorts like micro on right here you've

got the

stock right around 9270 is where it

closed you've got this nice Massive

Resistance level at the 200 day moving

average so if you get any kind of Bounce

in the stock you can see it's at 10128

that's where your 200 day moving average

is so that's where you'd want to be

selling your bearish call spreads above

that

level we want to be able to get in

a 20% difference in the strike

price so take the strike

price so if you have five points between

the strike prices you want to be able to

get 20% of that in terms of a credit

that's going to yield a 25% return so

let's just take a look at Micron and

these spreads are not going to be there

right now let's go because we need the

stock to bounce a little bit so if we're

looking to get that type Ty of credit

we've got to go up to

the oh let's call it the 10250 if

they've got that type of strike

price and they don't so they've got $1

increments here and we're selling a call

spread so we're going to be selling that

and let's say that we do a fivepoint

credit spread we'll go to the

108 and so for this you can see it's

almost there 280 bid off offed at two

the spread is trading 79 cents bid

offered at 134 so you can almost get

that spread right now and that's only

going out to September 6th on this

spread so wait for the bounce maybe you

can even get that spread done using this

resistance level which that high was at

111 so maybe a 110 115 bearish call

spread now you've got the 200 day moving

average to lean on and you've got this

horizontal resistance level here the

more resistance level levels between the

current strike

price uh the current stock price and the

strike price the better so your strike

price would be up here your stock price

is down here you want lots and lots and

lots and lots of resistance levels in

there as much as possible so that's how

you would play it you could see that the

option implied volatility on Micron is

50 7 so the alternative is to find an in

the-

money put that's relatively cheap and

then you would buy that so we're getting

a little long here so excuse me I've got

to find a pick I think that's what I'm

going to go with I'm just going to give

you a micron pick I like that GM

breakdown okay I would have no problem

buying GM puts take a look at the option

implied volatility there 31 so this is

going to set up really well for that I

would like to see the stock not get

above the open from this long red candle

okay so that'll be resistance and this

upward sloping trend line is

resistance and we'll take a look at the

low there which is $43 so I'd like to be

buying in the money

puts and let's see what we've got here

on GM now mind you we're buying option

premium Pete thinks that the market

could go down for a while here so let's

give ourselves out to October and let's

go deep in the money maybe the $50

puts and we could see that those are

trading at $9 with the stock at 41 okay

let's think about this they're

intrinsically almost

worth

$9 okay so the $50 puts watch the stock

if you can get the $50 puts maybe at

that juncture you know the stock rallies

up to maybe $43 or $44 you can even go

with the $55

puts go as deep as you possibly can you

won't be exposed to time premium Decay

and that's why we want to use this

strategy so I don't know what what the

stock is going to do or how high it's

going to bounce I would be looking to

buy these $50 puts if the market tries

to bounce to the 50-day moving average

and it gets rejected then I would like

to get into these maybe somewhere around

the $7 level okay I want to see this

long red candle hold I want to see the

stock be very very stubborn in trying to

re capture that long red

candle so when the Market's rallying I

want to see the majority of this thing

hold that tells me wham wham wham wham

the sellers are still in there if I can

buy it for $7 or if I could buy it for

$6 as long as this red candle is intact

I'm going to be pretty happy putting

that position on because again

I'm operating on the notion that the

market is going to struggle over the

course of the next two or three months

in that companies that have a lot of

ccal to them are going to really

struggle as well so that's how I would

play GM that's how I would play Micron

I've given you a couple of stocks to

look at watch our Wednesday live event

please come in sign up for it we do it

live during Market hours we feeli your

questions so there's a good chance that

your

question is also going to be someone

else's question and you'll get to see

how we respond two different

professional Traders both with different

perspectives answering your questions

those Live Events are great hope to see

you then if you have the ability to take

some time off typically mid August to

the end of August is a great time to

also take some time off because you will

see the volume start to dry up over the

course of the next couple weeks thanks

so much for watching hit that like

button and we'll see you on state thank

you

thank you for watching this YouTube

video I'm Pete sters and I'm going to

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