Following three days of advancing prices amid declining volume, the Nasdaq put in a big outside day on Monday as the index staged a notable afternoon reversal lower. This was followed by Tuesday's own morning reversal higher on a neat touch of the 20 ema, as shown below.
While the speculative sentiment has not been singed, the overall growth-stock participation left something to be desired in today's session.
Liquid glamours lost ground today, including Shopify (SHOP), Alphabet (GOOG), Nvidia (NVDA), Netflix (NFLX), Amazon.com (AMZN), and Microsoft (MSFT). Recent IPOs, however, acted well, largely removing the threat of the speculative sentiment having peaked.
Today's scorecard looked like this:
S&P 500: +0.91%
Nasdaq Comp: +0.59%
Nasdaq 100: +0.20%
FFTY ETF: +0.06%
Watch List: +0.40%
The Nasdaq Composite has lagged the S&P for four days in a row. The above scorecard indicates the index was weighted down by the Nasdaq 100 today. The IBD 50 ETF, a proxy for growth, was barely in the plus column.
Connecting the dots, the growth sector is out of favor for the moment, as value/cyclical issues outperform. For now, this is de minimus. The bigger issue is that of an extended growth sector offering virtually no pattern setups.
As a result, there are no actionable issues to consider for Thursday's session.
Exiting a winner (previously discussed with premium subscribers)
The view here is that moving average violations are the single-best tool to use in exiting a winning position. I have created a simple matrix showing the seven possible ways to use the 3 moving averages (9 ema, 20 ema, 50 sma) to exit a position. Included are suggestions as to what percent of a position might be exited on a violation of a certain MA. Of course, what you use is up to you and your unique makeup as a trader.
For example, you will find that Scenario 4 involves 15%-20% off on a violation of 9 ema, 25%-40% off on a violation of 20 ema, and 40%-60% off on a violation of 50 sma. This is the scenario I might use for a big winner. Scenario 5 is one I would be more apt to use since the bulk comes off on a violation of the 20 ema. It entails 25% off on a violation of the 9 ema and 75% off on a violation of the 20 ema.
The term "violation" means either an intraday break or an end-of-day close, depending on your preference.
If price closes below the 20 or 50, I would watch to see if participants support the stock by sending it back above the MA over the ensuing 1-3 days, or even longer. If so, I would consider buying the portion I had just exited on a tick above the high of the first bar to close back above the MA. This is known as "trading around the core" position.
It is preferable to only use the MAs once price is up 15%-20% or more from entry.
To download the matrix, please click here.
For intraday ideas and analysis: https://twitter.com/mardermarket
All stock charts created using MarketSmith unless otherwise noted. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. All rights reserved.
The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.