Weekly Plan 2/6 '22

Approaching end of Earnings Season

Traders-

This week marked an end to a wild few days of trading with unprecedented moves in several stocks like FB, AMZN, GOOG, PYPL etc .

I personally stayed on the right side of most of these moves with the exception of Spotify SPOT which I had expected to do better.

Unfortunately, in my experience, it does not look like this wild ride is about to end any time soon and it may very well take us as far out as Summer where some of this volatility may abate due to seasonality.

I am just fortunate to be able to glean some clues on the tape (orderflow) which save me every now and then from making absolutely stupid trades, and I am happy to share whatever I see on the tape with folks every week.

In this installment of my weekly newsletter, I am going to review 3 things:

1. My recap of main ideas of last week and how they fared

2. My outlook of S&P500 emini for the week ahead

3. Some thoughts on upcoming earnings

S&P500 is currently stuck between two key levels- I think it will chop more and be frustrating to trade for any one expecting clean, directional moves this week as long as these levels hold.

Weekly Recap:

The purpose of this section is always to review the week that was. My own plans and see how they did. Not out of a sense of boasting but more from a perspective of being transparent with the ideas shared and if they made any sense. Feel free to skip this section if you are in a hurry and scroll down to section 2 for next week’s plan.

Starting with S&P500 emini..

For this past Monday , my primary hypothesis was that we may find sellers at 4430 (we closed at 4422 the prior Friday) . We opened at 4420 and did find some selling action on Sunday night but it was only worth about 30 points. I did not quite get a deeper dip lower into 4350/4360 which I was hoping to buy and in Monday’s cash session we were able to easily break above 4430 and trade 4480 shortly thereafter.

I shared 3 scenarios for Monday’s cash session on Saturday night, and while scenario # 3 was the 3rd most likely in my opinion, this is the one that ended working. This was no shorts for me scenario if we opened the cash session above 4411 on Monday.

A lot of folks were caught wrong footed and shorted on Monday open even though the open was above 4411, and that played a part in sharp rally in that session.

For Tuesday my line in sand shifted to 4480 and I remained bullish as long we did not see any action below 4480. We opened above 4480 and then the rally continued and continued well past 4550 as expected by my plan.

At this point we were getting into the upper end of my long term range, and consequently I started seeing signs of strain on the tape around 4562 and that is where I became bearish. On Wednesday it was tough being a bear, as I endured S&P500 rally another 20-25 points off my 4562 but eventually the selling resumed on Thursday.

On Friday AM we traded down as low as 4440, a full 120 handles off my bearish pivot 4562 from a day earlier, and this was pretty much my LIS for the week at 4440/4450 and we managed to find some bids here , trading then as high as 4532, which was very close to my bracket for Friday at 4536.

I think no one expected Friday’s NFP # and that has introduced additional calculations for market to digest. More on that later.

On Friday, the day ended sharply lower from upper end of my range 4532, we closed back at my bracket low of 4480, presumably on some fake Ukraine invasion news late on Friday after noon.

Wild week, but I stayed on the right side of the action with that open above 4411 on Monday and my bearish bias on Thursday, Friday with some surprises for me personally on Wednesday.

I document these moves to contrast not only with my plan from prior week, but also help form my opinion for the next week. I will use these contexts and levels in my trade plan in section 2 of this newsletter.

Here is the link to my trade plan from last week: Weekly Plan 1/29

Further reading: More Plans

As far as individual stock names go, below is a summary of my trade plans:

Bullish:

1. I was bullish on CME which had a very good week rising from 225 to 246.

2. I was quite bullish on GOOG all throughout January sell off and was rewarded with a move from 2500 to 3100 post ER. The stock has now cooled off a bit since closing below 2900 as the US advertising market shrinks and GOOG sees increasing competition from the likes of AAPL and AMZN. AMZN BTW at this stage is not revealing its advertising revenue but it may be substantial. Do note the overall AD market is not very large relative to size of these companies, around 2-3 Trillion dollar globally and any gains for AAPL and AMZN have to come from some where - I guess from GOOG and FB.

3. I was also bullish on AMZN at 2700 before turning cautious on it at 3000 right before the earnings call and sharing 2760 level for reentry which coincidentally happened to be the exact low of the week right before the ER and that massive 500+ point move trading as high as 3300 at one point. AMZN is one of my TOP picks but technically at the upper end of a range around 3200/3300.

4. Few other names that I was bullish on and shared through the week were AMD at 105, ARKK at 66 , both did quite well going up to 122 and 75 respectively. XOM I was bullish at 74 and my target close to 82 was met. Overall a good week for selective names but not overall market.

5. One name that did not work out as expected was SPOT. I expected this to do well at 206/207 with my LIS being tight at 196, but this stock fell a lot after ER trading sub-160.

Bearish:

1. On the bearish side of the ledger I was very bearish on FB right before the earnings and shared my thoughts in this newsletter. See link below. The stock fell almost 25% from 329 to 235 post ER. My FB Pre ER Analysis