The Weekly Selection: 07/09/2023
Volume 045
Introduction
Hello Everyone,
Welcome back to another issue of The Weekly Selection, a newsletter in which I address the financial markets, provide commentary, tips, and a few ideas I’m watching into the week.
Jumping right in, broad markets traded awkwardly during the holiday week. This should not come as a surprise to many, but without a proper 5 day week, its rare to see consistent price action. It was a holiday after all, so it’s fair to assume that many of the decision makers in large institutions were out of office. The most surprising to me was the final day of the week, with spy trading up in the middle of the session, just to be smacked back down into the close. Certainly made for an eventful day, and it’s always good to be ready for this type of day, especially on a Friday where individual stocks can be traded with 0dte contracts.
Below are the charts for the top indexes, with annotations:
SPY 0.00%↑ up first, which is giving us great opportunity yet again. As many of my loyalists know, my favorite “pattern” to trade is an engulfing candle followed by an inside candle. This gives us a clear confirmation over the previous candles high, and a clear stop at the previous candles low.
XLK 0.00%↑, the tech ETF gives us a better look at why weve seen such a drastic rise in indexes as of late. Personally, I think the overweight status of the top 7 or so stocks will come back to bite us even if other sectors begin to perform. This type of lock into trading exclusively one group makes for an unenjoyable environment. Rebalances are certainly coming in the next few quarters and I see this allowing rotation and continuation in the index via other sectors.
Tip of the week
Using moving averages as a tool to assess the strength of a business for a swing is crucial before taking any swing/duration trades. For example, If I am looking to take a position, I will always make sure my entries are right at or above what I call “the moving average stack”. For me this is the 10, 20, and 50sma and when all 3 are coiled or stacked on top of each other I’ve found then to be ideal for entries that lead to the shortest term explosive price movement. This can be see below on AVGO 0.00%↑:
Past Performance
Pretty poor performance in the ideas last week. Gush is still one of my favorites, and I will maintain my position there despite nothing really of value shown last week in the chart. WING 0.00%↑ broke down out of its double inside day on Monday, which solidified its fate for the rest of the week. HUBS 0.00%↑ maintains its range and still looks strong. Expectations were low for the holiday week, so I’m ultimately not too concerned.
Charts
First up, and probably my favorite is AVDX 0.00%↑. This mid cap is on a pretty good year of fundamental growth, as well as setting up a cup and handle pattern, which for anyone who takes tutoring with me knows this is my favorite.
GH 0.00%↑ sitting nicely under a gap, strength over the last month.
CFLT 0.00%↑, fundamental grower with a nice setup at the top of its 52wk high. This is a high probability low risk setup with stops below the range.
Light volume, large timeframe consolidation on leveraged oil. Love this risk/reward here.
Seeing lots of nice mid cap setups this week. Given the big dogs can hold on I think some serious headway can be made in these smaller stocks.
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