Trading Newsletter – 2/7/2020
Quote of the Week
“You need to know very well when to move away, or give up the loss, and not allow the anxiety to trick you into trying again.”
– Warren Buffett
Back on track.
All is right in the markets when any news regarding vaccines comes out. It seems as if investors only care about whether COVID-19 is going away quicker than expected versus valuations on companies.
It’s interesting to see how 50 years ago trading in the stock market was considered investing. Now, trading and investing are completely separate activities that achieve different outcomes. In my personal opinion, I think the more machines/algorithms that trade in the markets than humans, the more predictable the stock market will become. Since March, this market has been unrelenting in “trading” more than “investing” as valuations have gotten outrageously high, while momentum (high-growth, low revenue) stocks have taken the spotlight.
At The Financial Cloud, we’re trying to help everyone in any stock market-related search for knowledge. We have trading education with charts and analysis, as well as investing and upcoming economic events.
*See below for full calendar Presented by Earnings Whispers (check them out here)
Upcoming Economic Events
On watch for next week:
- Initial Jobless Claims — how many people were looking for a job but couldn’t find one?
- Existing Home Sales — how many existing homes have been sold?
Charts, Charts, & More Charts
These charts are intended to help you to become a better trader, so don’t take every trade seen and expect to make money. Do you own due diligence and research before investing and/or trading.
SQ (1-hour timeframe)
Analysis: After completing a higher degree wave 2 pull back towards $169, SQ has a nice falling wedge developing on the hourly time frame. The 1-2 count is looking to breakout to test recent highs for a higher degree wave 3.
Resistance to watch: $181.30, $185-187, $193-$195, and $198-$201 supply zones
Support to watch: $174-$175 demand zone
Breakout can confirm over the $182 price level
Long invalidates below $172
FB (2-hour timeframe)
Analysis: FB has a potential reversal in the works after testing the daily bull flag support. All EMA’s are pointing to the upside, where it can surge towards $290 or higher in the latter part of this week. What I’m watching for is a clean breakout over the $277-$279 supply zone with continuation higher to test overhead supply and possible trend resistance.
Resistance to watch: $277-$280, $289-$292
Support to watch: $268-$269, $274-$275
Breakout can confirm over the $281 price level
Long idea invalidates below $268.50
FSLY (4-hour timeframe)
Analysis: As we all know, FSLY had early earnings news that caused it to dump very aggressively. I do expect the downtrend to continue as soon it tests the $83.56-$85.66 supply zone.
Resistance to watch: $83.56-$85.66, $92.42-$95.25
Support to watch: $62-$65, $70, $75
If FSLY breaks through the first supply zone, a potential target for the next short opportunity could be the $92 level.
First short invalidates over $86; the second short opportunity invalidates over $96
NFLX (1-hour timeframe)
Resistance to watch: $486, $490-$495, $500, $510-$515
Support to watch: $477, $48
Long idea invalidates below $476
Breakout can confirm over $486 and begin to run once price is over $490
BA (1-hour timeframe)
*Disclaimer*: I actively hold a position, but I don’t believe my opinion is biased here.
Analysis: Last Monday, BA saw a monster gap out of daily channel resistance on positive vaccine news. The flow last week was ridiculous (ranging from 50k sweeps to multiple multi-million dollar call orders). Big money has been buying this name all week with tons of OTM plays expiring anywhere between 35 days out to 2022. This leads me to think a larger move is coming after a strong breakout of this falling wedge. There should be MRNA COVID-19 vaccine news coming this week, along with a chance the FAA ungrounds the 737 as soon as November 18th (this Thursday). These two catalysts alone can send BA well over $200 fast.
I will be buying a stronger pull back on BA, if given, but I’ll proceed with caution if the FAA chooses to not unground BA’s major money maker (the 787 MAX).
Resistance to watch: $191-$192, $197-$200, $203, $208, $219 ,$229
Support to watch: $180, $183-184.25
Long idea invalidates below $179
AMD (4-hour timeframe)
11/18/20 – AMD Reveals the Radeon RX 6000 Series
11/11/20 – IBM & AMD agreement to work together on advancing security & AI for hybrid cloud environments.
11/06/20 – Price upgrade by Wells Fargo from $82 to $100
10/04/20 – Added to Goldman Sachs conviction list
Analysis: The technology sector continues to trend higher as SPY looks to make new all-time highs. The pattern (double bottom) is showing uptrend from the current price.
Support to watch: $84.80 / $85.12 / $86.08 / $87.25
Resistance to watch: $78.74 / $77.68
JPM (1-hour timeframe)
Analysis: The financial sector trended higher following the hope for a vaccine. JPM has been forming a bull flagpole. It’s currently in consolidation and waiting to break resistance for the next leg higher.
Resistance to watch: $115.30
Support to watch: $113.35
CRM (15-minute timeframe)
11/12/20 – Downgrade to overweight by Morgan Stanley due to significant margin expansion.
Analysis: CRM dropped primarily due to a downgrade from Morgan Stanley and is currently showing a descending triangle. Look for the break of resistance or support to play the trend.
Resistance to watch: $250.32 / $253.56 / $255.60
Support to watch: $247.75 / $245.35 / $244
SLV (Silver ETF)
Silver has been making a massive bull pennant for the last few months and is primed for wave 3 of its super cycle. With a democratic president coming to office, December delivery contracts due, and stimulus around the corner, I still believe there is no better time to go long on silver.
On this chart I have charted out a short-term bullish wave projection breaking out of the pennant (Green 5-point wave) and a mid–term 5-point wave projection.
The short-term projection should have us retest recent highs of $27.50.
Shares or January 2022 leaps are the safest options for SLV.
COMM (CommScope Holdings)
There’s no better time to think about going long on COMM. It has broken its long term downtrend and is primed to break its short-term downtrend, signaling a reversal to the upside. Recent earnings growth has piqued investors’ interest once again with increased volume confirming a possible move to the upside. I have been noticing heavy call volume for COMM as it’s also a potential takeover target going into the next year.
Shares or January 2022 leaps are the safest options for COMM, but a short term $11 call could pay heavily if we break the green resistance line.
CGC (Canopy Growth Company)
CGC has momentum on its side once again with Biden almost a sure thing as President. He heavily favors decriminalizing cannabis and, with more states now legalizing it, I believe now is the time to go long again, even with the most recent run. Again, with this chart I have done a short (green) and mid (white) cycle to show possible bullish waves.
January 2022 calls would be the safest play here. A short term $26 call could pay heavily as well but would be considered higher risk.
O (Realty Income)
O got hit hard from COVID-19 and has yet to fully recover, making it a great target for potential recovery. As a REIT (real estate investment trust), it generates revenue by owning property and pays out high dividends from the rental income. O is a safe bet to recover as it holds safe haven properties such as pharmacies (Walgreens) and gas stations (7-eleven).
O also pays a healthy dividend which is very attractive for long term investors and investment funds. I have highlighted a possible bullish wave recovery and key price points to focus on in the above chart.
Shares are always a safe route to go because of the dividend, but January 2022 horizontal call strategy LEAPs could pay nicely too.
CVS (CVS Health)
CVS is primed to be a key player in distribution of the COVID-19 vaccine in the coming years. This sets it up nicely to have a major bull run. With a high dividend, low P/E ratio, and bright future, CVS is one of my favorite top long plays. I believe CVS’s fair value is closer to $120/share. CVS has been held back in recent years from Medicare-for-all talk and the burden of its Aetna purchase. With those fears mostly behind us and the recent break of a five-year downtrend, it seems now is the time to buy.
I have highlighted a short-term bullish scenario for CVS on the chart above.
Shares are a safe play due to the high dividend, but I believe January 2022 leaps or January 2021 calls would be excellent choices for CVS.
– The Financial Cloud Team
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