Mega Caps to Fuel Santa Rally.
Weekly Plan 12.22.24
Hello traders-
Welcome to the last and a slightly abridged Weekly Plan of 2024! As we officially sunset this year, I hope y’all had something of value learned in last one year and I look forward to the next year to be a blockbuster year for our folks.
At some level last week’s action was a befitting ending to the rather dull action in the Emini S&P500 all thru the year. We saw almost a 400 dollar round trip in about 3 sessions. Some folks who caught the moves on the right side, had it really good, some from what I hear were glad this week was over!
From my previous weekly plan shared last Saturday, I had resistance coming in at 6170 and support expected at 6067. While 6170 was to the tick high, not just last week but ever since we first shared this level the week of Thanksgiving, the support level was no match for the sell off brought to life by very hawkish commentary from Powell on Wednesday. This was an extremely vicious sell off, the likes of what we haven’t seen going back to 2022.
Thursday session was rather dull, but then on Friday, we ended up erasing a lot of ground lost on Wednesday off the backs of that supremely poor inflation report. While on Wednesday many had a confused stance about Powell and the FED- why cut rates if you think inflation can surge again, by mid Friday Powell started looking not so sharp after all based on that Core PCE number. This is why I say you have to take FED with a grain of salt. I assign a grand total of 0 value to their forecasting of economic activity. In fact I do not even understand why they have to do this little dog and pony show every few weeks when the overall value it provides for both long term investors and day to day traders is about 0. Just publish the minutes and be done with it. The only signal value FED offers is when they do another round of QE.
Anyways, I digress.
In related markets, we saw both the Dollar and the VIX index subside considerably from their respective Wednesday peaks. This is expected, especially in the Dollar where I think if we do not bring this down below 105 sooner than later, this will be a catastrophic macro background for Global industrial output and commerce. I covered this is much more detail in my last couple of Weekly Plans so I am not going to rehash that. Please refer to those weekly posts, in case interested.
To derive next week’s levels, the main context I am going to borrow is from that Thursday auction where I felt the markets ought to hold 5900 and push higher into 6000 and beyond. There was an aberration on Thursday night when we did for a brief few hours, dip about 30 handles below 5900 but this was short-lived as the US session opened for business on Friday. On Thursday, perhaps I was the only bull to call for the lows to hold at 5900 which proved to be correct in hindsight as we rallied sharply higher some 150 points in the S&P500 index. So I view Friday’s auction as more reliable than what we saw on Thursday night.
If this assumption turns out to be correct, I think we should hold those Thursday levels around 5934 if tested. We closed the week at 5992. These levels are from March Emini.
My key levels on the week will be 5967 and 6070.
Scenario 1: I think as long as we hold 5967, we may have seen the lows this week and we may retrace back into 6070.
Scenario 2: If we break and close above 6070, this move may have legs to retest 6170s during that first week or two of January, but minus that this level could provide resistance.
On the downside, if we do test 5934 this week, I will be a bit surprised and definitely if we manage to close below 5934, I think it will invalidate Friday’s bullishness. The main risk I see for equities at this point comes from the bond yields. These have to cool down. We are not ready for an interest rate regime of 4.6% on the 10 year. We simply are not as a debt laden country.
Remember, this is a short week with only Monday, Thursday and Friday as full session auctions. The markets will close at noon on Tuesday and will remain closed the following day.
Some other stuff on my radar
AMD
This stock has absolutely been a nightmare stock to trade. There is no end to the misery.
Often this can create opportunity.
I like the January 17th, $130 CALL which is now like 2 dollars.
I think if general market takes off, there is a risk of short squeeze in AMD. The stock is 118 now.
AVGO
This is an older orderflow stock which I first shared as a bullish setup back in July after the split at around 150. It is now trading $220. I think longer term action on AVGO looks good for a push into 240s and should be supported on any 4-5% pullbacks.
In the super short term, this 12/27 Weekly CALL for $225 is offered right now around $2.25. If this call can be had around $1, may be $1.5, this could make sense from a risk/reward.
Crypto
On Friday at the open, in. my chat room, I shared why I was buying Crypto stocks like COIN and MSTR when COIN was like 256. This was pretty much the low of the day and the stock took off trading 282 at time of this post. A super nice 25 dollar rally in COIN within one session, a rally of about 45 points on MSTR in one session!
Some of the calls in these stocks doubled within a few hours. This 400 CALL for next week went from like 3 dollars to 6 instantly.
Keeping an eye out on the general market on Monday, I think if this call can be had between 2 and 3 bucks, it still makes sense to me. Remember we did share this 260 support in COIN and 300 support 300-320 support in MSTR several days ago in this Substack with our subscribers. So this is not a new position.
Note that these short term option plays are based on assumption we have seen the lows and we hold 5934 next week.
TPR
I first shared this Coach handbag maker stock here back when it was like 35 dollars and then upon Trump reelection I shared this at 44 to trade 60 dollars.
It is now like 64 bucks. I think next 4 years of Trump administration are going to be quite good for the top 10% of the earners. This could have an outsized impact on Luxury discretionary companies like Tapestry. I favor any pullbacks in TPR into low 50s, may be 55 to remain supported for a push higher into 100 dollars. A 19 PE company, making a billion in profit a year. Minus anything too drastic with China, I think this stock is headed higher.
TSLA
With TSLA, I had an extremely robust call last week where I called for more bullish action in TSLA at 434 which was like the exact low before it slammed higher right into 490, missing the magical $500 number by a handful of points.
After the Great Selloff of Wednesday, I again shared support at 420 to target 450 in my chat room which was again traded by Friday.
This is a very nice stock to trade. Paradoxically, you have to think about TSLA in really unconventional terms. Normally when we do any sort of analysis on a company, we (as trying to make sense of markets) look at things like market share, margins, EPS, sales numbers, MOATS etc. Not with TSLA. Or well rather let me put it this way- the traditional analysis on TSLA doesn’t work. Atleast not in this moment in time.
In TSLA, I have been talking about the “Bromance” and how long can it last. Yes, that is a factor to consider in TSLA, when it comes to trading and coming up with price levels in 2024. I mean at this point, the stock was under some pressure on Friday, but I will not rule out more upside in TSLA. However, remember what I said earlier, the 100%, the 200% move may have been made already. Now, if Musk gets relegated to the outer orbit of President Trump, this will be a serious setback for the man as well his stock. This is a given.
But as long as this love affair continues, we may have support on the stock. But due to inherent finickiness of these factors and the forecasting challenges that come with such a situation, I will add some risk premium to the mix, let us say 15%. So this brings us, based on Friday close to about 380-390. So I will be more comfortable with a 390 as a stronger support, if it gets traded rather than here at 420.
Again, some of you may agree with me, some of you may not. Like 99% of the times, I too will laugh at such an “analysis”, but you know what- it has worked. When we had analysts selling stock at 200 dollars, due to “fundamentals”, I was bullish at 200 due to exactly this “bromance”. And it paid off. The stock traded almost $500! Did they sell any more or any less cars? Did they make even a cent in profit or sales more?
No!
Just know that as part of finding good setups for our folks, sometimes we will go to places which border on ridiculousness and incredulity. There is a method to the madness ;)
PLTR
PLTR was also an extremely good call from last week where the dip was quickly bought up after I raised my price target to $100 and the stock closed at 81 dollars.
I think this continues to look good. And I think this stock could perhaps be supported on any general market weakness. My target remains 100. I am being a little conservative since the stock, by most fundamental analysis metrics is overvalued. But we will reassess our targets if and when we get there.
Now if you are a longer term reader, 1 year or older, you likely fully understand the cadence of this publication. You probably understand that there are long periods of time when we do not have great setups. And then suddenly there is cornucopia of long setups. This is not something that I control but is a nature of the markets. Someone super new to trading or to this publication may not yet fully understand this. But know that my style is to buy a stock when it is not even on radar of most people. This is in accumulation zone. Most furus and most traders-analysts like to FOMO when the stock is already making new highs. Not me! And this often means there will be weeks and months of dry spell. This is not a bug, this a feature of the orderflow methodology.
When you FOMO you end up buying TSLA at 500 and DOGE at 50 cents. Remember, I gave DOGE one year ago at 6 cents and then later at 11 cents. Right here in the Substack. When I went bullish on DOGE at 6 cents, even my most hardcore readers stopped what they were doing and asked me “if I am serious!”. Yes, I am always serious.
Now on the execution side, one technique I found extremely helpful for me is to just take all the signals my methodology generates. Sometimes I may just feel I like this idea better than the other. And in doing so I may not trade all the signals. May be I think its cheaper, may be I think I know something about this company, may be I just have a hunch- these are all excuses not to take all the signals generated by your trading methodology. So this is number 1 rule- don’t filter out or override the signals based on your own bias.
The other rule is harder to follow but essentially it is more important- it is to cut the loss when wrong. And let the winner ride. Most of us are the opposite- we cut the winner sooner and let the loser ride. This is a fatal error and must be corrected. Only way you fix this is to have no emotion or feelings in this game. I am not saying don’t be passionate about the game. I am saying don’t be emotional about results of the game. Again most of us love the results when they are in our favor and hate playing the game. This is just a recipe for frustration. Flip it around. So next time, see if you can cut the loser at 5-6% before it becomes a 60% loser. And see if you can let the winner become a 20% winner before you cut it at 2%. I am sharing this as a personal perspective and this is perhaps more applicable to someone who already has a 50% win rate. For anyone who is just starting out, you have some prep work to do and by that I mean you have to find some sort of strategy which gives you a 50% win rate first. Read my educational posts where I have shared some long term strategies.
If you have a 10% win rate strategy, your winners will have to run a lot to cover for your losers. This is not to say you give up. I am just showing you the nature of the game, using statistics.
Signing off for now. Merry Christmas and Happy New Year to all our readers from all corners of the world! Remember there will be incredible opportunities in 2025. You wanna be subscribed now BEFORE massive price increases in 2025. And for existing subscribers please keep your payment methods updated. If they expire, unfortunately I will not be able to grandfather anyone in at lower prices (Substack rules, I don’t make these rules).
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