07 Oct Weekly Elliott Wave Forecasts and Trading Ideas Report
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Weekly Stock Market and Trading Strategies Report Week of October 7th
Results and Notes: Smash down and reversal, high cash position though for SRP last week.
More volatility this past week. We came in with a 90% cash position as the market had taken us out of a few positions prior, or we sold some on the way up for gains. Usually if you follow the markets lead and don’t get too cute you can avoid major pain. The way to do that is dont replace positions you sold for a loss right away, instead sit on your hands and see if the market is trying to tell you why nothing is working. So that is what we did, and sure enough the SP 500 and rest of the indices collapsed in a 3 day type sell off before a reversal on Thursday. We saw very high CNN Fear Gauge readings near the weeks lows, and then recovery rally ensued late in the week. We put on 2 positions on Friday, one a recent IPO trading at a low valuation and another an IPO from a few months ago that is very strong fundamentally and technically. Still at 80% cash but now we have room to add positions if the market sees fit.
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Short Term and Long Term Elliott Wave Views for the SP 500 Index
Short Term: Ran into resistance recently at 3020’s zone, and a minor 2 pullback was projected. However, that turned out to be a steeper than planned pullback, the low this week on the futures at 2855 was right on a fibonacci point I gave my ES Traders group on Tuesday, and we rallied 100 points off of it. Will want to see that area hold or 2865 on SPX. Currently at 2952 we are well above both figures.
Long Term: (Wave 3 of Intermediate 3 of Major 3). The long term Primary Wave 5 up from Feb 2016 lows continues, we are in Major Wave 3 up from the 2345 lows of Major 2 in Dec 2018. As you will see on the Weekly Long Term chart, we held the 34 week EMA lines multiple times this year on pullbacks, and in fact this past week closed just over the 13 week EMA line on Friday, so the uptrend is not dead.
Long Term View: Int 3 of Major 3 underway to over 3000 made up of 5 waves
Recently decline pretty steep from 3022 area, if that was a Wave 2 of 5… then we are in early stages of 3 up here of Int 3 of Major 3. Or the wave count is getting complex and we have to watch 3022 to get taken out obviously.
Click to Enlarge
Short Term View: Wave 3 up
See notes at top of report, but the pullback was steeper than projected for a minor 2 down, yet the reversal was impressive. The short term wave count is a little muddy now, but 2960 is key area to take out on the upside near term. That is a Fibonacci resistance zone for the reversal off this past weeks lows.
Market Notes and Indicator Charts:
- Stayed in high cash position coming into past week at 90%, added 2 positions on Friday
- CNN Fear readings got pretty extreme mid week, shorts all got caught on wrong side late in week
- October tends to be messy due to Fiscal Year end selling by Mutual funds (Tax related movements)
- Poor economic readings doomed the indices during the week, but sets up FOMC for rate cuts again
- Earnings season about to start, will be crucial for market direction near term
Weekly ideas and tips on Swing Trading Success: Avoiding Panic decisions, keeping discipline
We are all human, so it’s easy to tell everyone not to get anxiety or panic on portfolios, or swing positions, or your long term plays. However, that’s human nature but also how bottoms and tops form as well both in the indices and individual stocks. The swing between extreme fear and extreme greed essentially is what marks various Elliott Wave patterns I try to assess. Sometimes though, the extremes on either end go bananas and patterns and emotions get out of control. This was the case this past week as the market fell out of bed quickly on economic reports, and took many stocks down with it. Luckily we had a high cash position and rode out the storm, but the week or two prior we could see cracks in the armor if you will. If you are a long term investor especially in small cap companies, its been a bad year in 2019, lots of headwinds. However, if the share structure, fundamentals, management, balance sheet, products etc are in place, then you want to avoid panic selling. When it comes to swing trading, you avoid panic decisions by incorporating our sell 1/2 when up 8% rule on all positions every time without deviating. We then move the stop up and sell out if its triggered or take gains as we deem fit. If you take a loss, its part of the swing trading game and you have to know 3-4x per year there are multi week periods where not much works and you have to take some losses. Try to avoid giving up or cherry picking after a rough patch in the market because then you often miss out on the next big winners as well. Stay disciplined, follow buy ranges and sell rules, profit taking rules, and capital allocation as well. Doing this helps avoid bad decisions and panic moves.
Swing Trade Candidates:
Each week we try to provide 5-15 Swing Trade ideas to consider as part of our SRP service. We often pick a few from the list during the week as actual alerts and or names from our other research that are not on this list. Some weeks we pick none from the list, but gives us some stock to watch as action unfolds.
KL- CHART LINK
13 week base for leading Gold exploration and production company. Gold looks like it may have one more run, if so this could move up out of this base near highs. Would like to see it hold $44 area
DOCU- CHART LINK
Post IPO rally after months of low end consolidation. Provides online e-signature platform for documents and more. 4 weeks consolidation near recent highs, bodes well considering last weeks rough market and this held up.
ESTC- CHART LINK
Also has been on this list off and on lately. Volatile as many cloud provider stocks tanked in the past 2 weeks, but it may be recovering here, 8 week overall corrective pattern. Data search platform that extends to multiple industries.
EDU- CHART LINK
Off and on our list of late, 6 weeks flat base pattern near highs for Chinese provider of Educational tutoring services.
INMD- CHART LINK
Also on our list lately a few times, broke out after the IPO and our list price at $21 to $26 area, then pulled back to $24 area and bounced back to 26. Exhibiting relative strength. 8 week Post IPO could press higher. Israeli company with Medical technologies business. This stock was hit hard last week but rebounded smartly from 20 to 24 area.
QIWI- CHART LINK
In a 7 week corrective base pattern. Tested below but then closed above the 13 week line this past week. Operates online payment systems in Russia, would like to see 21.40 area hold on weekly basis for this one.
STNE- CHART LINK
13 week corrective base pattern. Brazilian company providing financial tech solutions. Carving out right side of base pattern. Only down 1% this past week in the market carnage.
HMSY- CHART LINK
10 week corrective base, hit with healthcare sector wreck recently, but if it holds 33.50 area could rebound. Cost containment services for health insurance providers etc.
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