October 13, 2021

Things appear to be opening up below the surface, though a cursory glance at a Nasdaq chart does not show anything special. The Naz has outperformed the S&P in five of the last six sessions.

The last two days in the averages have been choppy affairs without much of a trend. A positive was today's higher price low in the Nasdaq which also makes for a higher pivot low.

The Nasdaq is 0.60% below its 20 ema. At this writing, Nasdaq futures are up 0.40%. Thus, we are nearly at the 20 ema.

Historically, during a period of higher inflation and bond yields, like we have now, a bull market has not topped until the Fed raises the fed funds rate one or more times. Enough markets have peaked after the third rate hike that the adage "Three steps and a stumble" entered the popular lexicon.

Because the futures market is not discounting the first hike until September '22, the view here is that the current pullback is not the beginning of a bear market. Of course, this is not known for sure. The principal geopolitical risk is a Chinese invasion of Taiwan, which would discombobulate the semiconductor industry and technology as a whole.

Otherwise, to review, our three recent short-stock or inverse ETF ideas all took 1R in profit, SQQQ, SOXS, and Paypal (PYPL).

Critically, today showed the best performance among a number of growth stocks in a while. Growth titles showing good tone today included Crowdstrike Holdings (CRWD), Cyberark Software (CYBR), Datadog (DDOG), Digital Ocean (DOCN), Hubspot (HUBS), InMode (INMD), and Sea Limited (SE).

My post-close screens picked up 22 stocks in the Computer Software - Enterprise group, the most in quite some time for this favored group.

Despite the Nasdaq being in a down trend, there were enough good showings in today's growth sector, and particularly the enterprise software group, to warrant some long exposure.

The following names are believed to be the most attractive in the $13+ market for our strategy of speculation. Click to zoom in.

Bill.com Holdings (BILL)

Crowdstrike Holdings (CRWD)

Sea Limited (SE)

Snowflake (SNOW)

Upstart Holdings (UPST)

Zscaler (ZS)

In summation, despite the Nasdaq still being in a downtrend, today's push higher in a number of growth stocks warrants some long exposure to the sector.

Q&A

Q: In Twitter a couple of days ago you mentioned an initial stop loss of 4%, but several times in your reports you mentioned using 5% for most of them and 3% for aggressive entries. Is the change to 4% due to market conditions? Do you keep 3% for aggressive entries?

As a personal note, I have taken The Strat course. I was impressed by some interesting a new concepts that Rob mention, but I havent found a way to use the strategy as a position trader. I have also watched a lot of videos from Sara, and one of them seems very interesting at first glance, because she looks for Monthly Pivot Machine Guns, screening the market for at least 5 consecutives lower highs on monthly charts, and then look for reversal on weekly or daily with full time frame continuity, but I concluded to be buying a falling knife, so I abandoned the idea. I Think it is very interesting for swing and day traders, but I can not found any way to trade longer times with the strategy. 

A: I do not recall saying 5% for stops. I stopped using 5% quite a while ago. I use 4% and I use 3% if I have less conviction or think it is a more aggressive entry.

I agree with you on the Strat. I think it is mostly for day and swing traders. While the price patterns, e.g. 2-2, 2-1-2, 3-1-2, etc are 100% right on, and are exactly what we do with the bread and butter, I am still skeptical that FTFC is an improvement on our using the 9 ema and 20 ema for the trend. Rob's broadening formation is unique. For profit targets, I prefer using R multiples than his definition of "pivots."

Kevin Marder

Trading Lessons
Introduction to the service video (38:00)
Money management and risk management video (20:27)
Bread and butter pullback video (11:10)
Bread and butter pullback: Pt II video (15:09)
Bread and butter pullback: Pt III video (31:48)
Bread and butter pullback: Pt IV video (30:16)
System R
Short-selling video (25:53)