12 Nov, 2018

Trade of the week 11/12/2018

I don’t have a ton of confidence in this market right now. It’s still very choppy and it isn’t really clear which direction we’ll go.

Market futures are mixed as I type. My read on the charts right now is that I think we’ll see a bit of red near the beginning of the week. The major indexes are not showing much volume (~2/3 of average and well less than during the drop). This is not too surprising because it means that buyers are not rushing to buy back into this market.

On the SPY, we weren’t able to get through the previous high, just above 280.00. We could potentially drop to ~270 level.

On the NASDAQ, we see a similar patterns and similar signs of weakness, in my opinion. I really don’t like that this one closed below the moving average line (see annotations)

Overall, I think this pattern will eventually reverse but I want to be cautious until it does.

For this week, my Trade of the Week is Fred’s Inc (FRED). I’m going to be patient and let this trade come to me. If we get the small-ish drop that I’m expecting, then there should be no need to chase this one. At current levels, the RSI is showing a bit of over-extension and I really like the way that it is following the SMA (5) line up. Since it has abruptly expanded above this line, I think a bit of a drop back to the $3.16 area (Friday’s low) would be healthy. I will be placing my limit order at $3.17. If it doesn’t fill on Monday, I’ll update for Tuesday.

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