Trading Plan: 13 May 2022
Nasdaq (+0.06%) closed flat after a good reversal in the second part of the day. The volumes were higher than average and the last few days, so considering this price action we might find (intermediary) support at yesterday's lows. Watch the marked levels and both clues for a potential reversal (Thursday and Wednesday’s highs).
SP-500 (-0.13%) closed a little bit lower, but with the same story as the previous index. It validated old support at 3855 and the price was able to increase back. The bottoming tail suggests a consolidation in this area before a new possible leg down. Also, be prepared for a reversal as we are still in an oversold condition.
In the news
Powell says he can’t guarantee a ‘soft landing’ as the Fed looks to control inflation.
Twitter’s market cap has dropped to $9 billion below Musk’s purchase price as concerns about the deal emerge.
More than $200 billion was erased from the entire crypto market in a day as the sell-off intensifies.
Cryptocurrency luna now almost worthless after controversial stablecoin it is linked to loses peg.
Deaths from COVID begin to rise again.
Sectors
Best yesterday sector: Healthcare, then Consumer Cyclical. Worst sector: Basic Materials.
Best weekly sector: Consumer Defensive, then Utilities. Worst sector: Consumer Cyclical.
Best monthly sector: Energy, then Consumer Defensive. Worst sector: Consumer Cyclical.
Sentiment
NAAIM (weekly, neutral between 70 and 90): 24.31
VIX (neutral under 20): 31.77
Equity Put / Call Ratio (neutral between 0.7 and 1): 1.23
CNN Fear & Greed: 6 (Extreme Fear)
Breadth
Stocks above SMA40 (neutral between 30 and 80): 11.63%
Stocks above SMA200 (neutral above 30): 19.86%
Number of stocks that increased yesterday by more than 4%: 590
Number of stocks that decreased yesterday by more than 4%: 243
McClellan Oscillator (neutral between -100 and 100): -132.37
Earnings Reports
The market has been a consistent sea of red lately, but a few tickers today offered a glimmer of hope - among them was Affirm ($AFRM), the buy-now-pay-later (BNPL) company, which reported its Q3 earnings and soared +23.31% at the close and another +28% after hours. In the company’s FY 2022 presentation, Affirm provided exciting growth numbers that wow-ed investors. Specifically, Affirm posted +73% YoY growth in gross merchandise volume, a +137% YoY increase in the company’s number of active consumers, and a +54% YoY gain in revenue. Affirm’s quarterly revenue clocked in at $355 million, down from $361 million last quarter. However, the company was able to lower its transaction costs in Q3.
Noteworthy earnings reports for today:
What to trade today
Even if there were very strong reversals in the hard-hit stocks, keep risk management as the key mantra when initiating a trade. The market is not stabilized yet and these wide bars cannot offer a low-risk entry. Not a good environment for the trend-following trader. However, for a more active trader, there are some nice patterns, especially in the growth stocks (bull flags / 123 / bullish engulfing candles) that can be played with a percentual set risk (Stop Loss at ~3-5%) if the price continues higher and gets over a previous high. Do not forget the volatility is high and very large moves in both directions are expected.
I do not intend to trade, instead, I will watch:
Mgp Ingredients ($MGPI) is staying constructive above the EMA21.
NACCO Industries ($NC) shows higher lows with average volumes and declining ATR recently.
Do your due diligence if or when placing a trade. All ideas stated here are my own and do not represent trading or investment advice.
In order to learn more about trading, you may want to read:
If you enjoyed this story, you might subscribe to receive my newsletter first! If not a Medium member, here you can become one!
Follow me on Twitter for market updates.