Trading Plan: 25 January 2022
Nasdaq closed in green (+0.63%) after it plunged more than 4% intraday with a very big volume as a lot of buyers came in to buy the dip. Even if there were big positive rebounds, the net lows increased. Oils showed an impressive RS (relative strength).
SP-500 is also green (+0.28) after making a long bottoming tail with important volumes. Many stocks began in red and closed the day strong in green, rocketed higher. There are many reasons for the volatility, but yesterday's action might suggest the market is prepared for the news from Wednesday (Fed meeting).
The earning season is at the beginning and investors and traders wait for the direction: will we see a retest of the lows or a reversal?!
Sectors also exhibited the V-shaped recovery, with many SPDR-series ETFs bouncing off their lows and closing in the green.
IBM reported positive results from its earnings report, pointing to a continued turnaround in the company’s business.
The Federal Reserve meeting to disclose plans for combatting inflation starts tomorrow.
Tensions between Ukraine and Russia also fueled panic in the markets.
Sectors
Best yesterday sector: Consumer Cyclical, then Technology. Worst sector: Utilities.
Best weekly sector: Utilities, then Consumer Defensive. Worst sector: Consumer Cyclical.
Best monthly sector: Energy, then Consumer Defensive. Worst sector: Technology.
Sentiment
NAAIM (weekly, neutral between 70 and 90): 56.73
VIX (neutral under 20): 29.9
Equity Put / Call Ratio (neutral between 0.7 and 1): 1.26
CNN Fear & Greed: 41 (Fear)
Breadth
Stocks above SMA40 (neutral between 30 and 80): 23.49%
Stocks above SMA200 (neutral above 30): 28.21%
Number of stocks that increased yesterday by more than 4%: 534
Number of stocks that decreased yesterday by more than 4%: 296
Noteworthy Earnings Reports / Events for today
It’s been an exciting year already for Microsoft (MSFT, $301.54). On Jan. 18, the tech titan said it was buying gaming giant Activision Blizzard (ATVI) for $68.7 billion — MSFT’s largest-ever acquisition — as it looks to gain exposure to the quickly expanding metaverse.
Other earnings reports:
What to trade today
The huge bottoming tail formed in both main indexes might suggest a reversal day and coming back closer to the channel. All the opened shorts closed with a green candle. I do not make predictions as the market is always smarter, just identifying the highest odds.
For today, there is no real trading setup. Mostly all the watched stocks made long tails yesterday and good support will be very far for a low-risk entry. It is better to wait for a base before opening new trades. This might be good for investors.
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.