Stock Market Watchlist 25 Nov 2020

From the Stock Market Almanac “Trading The Thanksgiving Market”

For 35 years, the “holiday spirit” gave the Wednesday before Thanksgiving and the Friday after a great track record, except for two occasions. Since 1988, Wednesday-Friday gained 18 of 31 times, with a total Dow point gain of 601.32 versus Monday’s total Dow point loss of 546.19, down 14 of 21 since 1998. The best strategy appears to be coming into the week long and exiting into strength Friday.

These are the notes I’ve been sharing on the watchlist this week and seems to be ringing true so far. There’s a benefit to following seasonality trends, but as we know, nothing is guaranteed in the market so we must trade accordingly. Reminder: Thursday we are closed for Thanksgiving holiday and Friday we close at 1Pm. For these reasons I’m lightening up my trading activity. I’m also following seasonality trends and raising cash into this weekend, so I can go into next full week with a clear mind and ready to trade the trends that present themselves.

I mentioned weed stocks yesterday getting a pump up as the transition to Biden/Harris, however as of this writing (5:36Am EST), I’m noticing some pre-market weakness (still very early, may not mean much). I have been warning about MJ stocks being in a downtrend for well over a year, and to avoid the sector entirely. The most recent pump we got when Biden ‘unofficially’ won the presidential race, had weed stocks like ACB go from $4 to highs of $14 within one week. Those are tradable opportunities but not investing opportunities. Days after, we sold off and cut those gains in half back to $7 (ACB). This is the type of price action that is “un-investable” but you can trade it, if you’re fast. I tend to stay away from these names. It’s possible we see continued strength so I’ll monitor it for opportunity. Any positions I take in those names are usually small position size.

Retail names like ANF and GPS were pumped up in the value stock rotation. I suspect this may be coming to an end soon, not sure if these names can hold up at these levels into the end of the year. I just noticed on GPS (Gap) they reported earnings yesterday after-hours and their reaction on report was negative. The stock closed yesterday at $26.87 and as of this writing it’s at around $24 in pre-market. I’ve got this name / sector on watch for a short play now.

QQQ – (long swing) – Full disclosure: we are long QQQ calls. Since value stocks / travel plays have been hot, tech sector has been lagging. Names like AAPL have been trading in a range ever since their stock split hype and iPhone launch. FB has been extremely quiet recently, with it waking up a bit yesterday. MSFT, AMZN, GOOG, NVDA, TSLA are part of this fund as well, so with the exception of TSLA, they’ve been trading in sync as expected. By investing/trading the Q’s, you’re going long on a piece of all of these companies. I’m beginning to see some signs of rotation back into Tech/Nasdaq stocks for a possible December rally. This consolidation has been healthy in my opinion and is only going to setting the stage a big move higher. We’re currently forming a bullish engulfing candle on the monthly chart which is setting the stage. In addition, we saw some bullish options flow in QQQ yesterday, so when things line up it gives us a higher probability trade/trend. Essentially if Q’s continue higher, you can pick from any of the above stocks to play if you want to go the individual route. For example, FB usually has some nice momentum moves which generally net higher gains than QQQ altogether.

Key levels to watch and set alerts on:

294.98 – yesterdays high of day – as of this writing (616Am EST) we’re currently trading pre-market right around this level. yesterday afterhours we saw a pop and high of $296.92 – so that will be the next level to break for the path back to $300 psychological and $303.50 ATH (all time highs)

293.97 is an important level on the intraday chart from yesterday that we want to see holding in short term for higher prices in tech

293.50 area – is trendline support going back to March lows – this needs to hold for a continuation in uptrend / below $293 I change my long bias to neutral/short

TSLA – (long swing – caution) – Full disclosure: we are long TSLA calls. An amazing 2 weeks in this name. We’ve been net long the since S&P announcement with various positions, scalping and swinging in this one. (ultimately the money was made on the sitting, once again). Yesterdays notes mentioned to watch 526 level which was Tuesdays high of day, and right out the gate TSLA took a little dip to retest that level (526.20) and didn’t look back, closing at $555.38. I mentioned Tuesday the next level above us that I was seeing was $559, and we ended up hitting the high of day of $559.99, pretty amazing stuff! Now, I am signaling to be cautious here. We’ve already had a massive 2 week move in this name, so the risk to reward here continues to diminish. As of this writing pre-market (6:47AM EST) we are hovering at yesterdays close of $555. I believe there’s a bit more juice to squeeze out of her, but caution on chasing is now prudent. There was some news that I just got alerted on by Investing.com that Tesla will recall 9,136 Model X cars. Whether this will significantly affect short term price or not, we will see. In addition at 3:21 am there was some news about Tesla facing class action lawsuit over allegedly covering up Model S, X suspension defects.

Key levels to watch and set alerts on:

$555.38 – yesterdays close / below that: $551 and $548.53 is another key level to watch for continued momentum.

$564.81 – opens the door to $569.40 pre-market highs as of this morning / above those levels as I mentioned in yesterdays watchlist I’m looking for $575 and the big $600 level – not as confident it’ll happen today, yesterday I was much more bullish. As always, prepare for anything, create a plan and set alerts accordingly.

SQ – (long swing – caution) – Full disclosure: we are long SQ calls. This name has been really good to us in the trading room with several plays paying over 30-50%+. It’s now in a slightly more cautious watch. Yesterday I wrote about possible pullback being the 4hr chart was showing signs of overbought conditions. Right out the gate yesterday it dropped from $208.04 to a low of $199.50, which broke an uptrend line I’ve been watching that goes back to Monday Nov 16th. Overall, not concerning for the ‘long term’ prospects, but for shorter term trading there are several technical areas on watch that needs to hold for us to stay long.

Key levels to watch and set alerts on:

202.90 – yesterdays close would be an encouraging level to hold above going into today

199.50 – absolutely essential key level I am watching. if under this, I will cut my SQ trade and wait for it to set back up again. would indicate a short term price reversal.

203.53 / 204.55 – encouraging action would be to reclaim this level and begin building a new base of price action. if it can hold this level solidly then it’ll open up a push back to $208 level+ but we take it one step at a time.