Trading Plan: 24 January 2022
Nasdaq continued the correction (-2.72%) and closed at the lows, net lows reaching the highest levels since the COVID crash (16 New Highs vs. 806 Lows). Even the strongest stocks capitulated. Next supports: 13.000, 12.400, and the last base breakout at 12.100. As per Stan Weinstein’s Stage Analysis, Nasdaq closed under the SMA30 on weekly (not shown here), which might suggest a transition from Stage 3 to 4.
SP-500 closed also in red (-1.89%) with very big volumes. The index tumbled 5.68% this week, marking the index’s worst weekly performance since Mar 16, 2020. After this deep drop, there is possible a bounce / some relief rally and then a downtrend continuation to 4300 area. The highest cap stocks, $AAPL, $MSFT, $GOOGL, and $AMZN have not reached their support areas, suggesting the index should move lower. I will wait for the confirmation, not anticipation.
On Wednesday, 26 January 2022 Federal Open Market Committee (FOMC) should leave interest rates unchanged, but investors anticipate an immediate end to quantitative easing (QE) asset purchases.
Growth stocks made a small base during the week, but of Friday they were sinking. Their valuation high seems still high ($SNOW 44x, $NET 33.7x, ZS 30.7x, $S 30.1x, $DDOG 29.6x, etc.) but who knows which are the right values?!
Intel will invest $20 billion in semiconductor chip manufacturing facilities in Ohio.
$NDX Forward PE has come down to 23x.
Ethereum lost 9% and traded under $3K to $2,730. Bitcoin broke below $40K thanks to a 6.25% loss.
Sectors
Best yesterday sector: Consumer Defensive, then Utilities. Worst sector: Communication Services.
Best weekly sector: Energy, then Utilities. Worst sector: Consumer Cyclical.
Best monthly sector: Energy, then Financial. Worst sector: Technology.
Sentiment
NAAIM (weekly, neutral between 70 and 90): 56.73
VIX (neutral under 20): 28.85
Equity Put / Call Ratio (neutral between 0.7 and 1): 1.26
CNN Fear & Greed: 43(Fear)
Breadth
Stocks above SMA40 (neutral between 30 and 80): 22.44%
Stocks above SMA200 (neutral above 30): 27.44%
Number of stocks that increased yesterday by more than 4%: 59
Number of stocks that decreased yesterday by more than 4%: 992
Noteworthy Earnings Reports / Events for today
What to trade today
The market might face some volatility again until Wednesday when the FOMC meeting, I do not recommend trading these days, just focus on the portfolio, last week was a great one for shorts. Here is the recap of the trades and their status:
And some new ideas (all short):
Abbot Laboratories ($ABT) found old support and consolidates it there. If the market continues its downtrend, a breakdown under the black line is likely to happen if sellers (with volumes) step in. Stop Loss above Friday high.
Murphy USA ($MUSA) acted very well during the last months, but now it seems it might capitulate. Entry at Friday low with Stop Loss at Friday high.
Please 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.