The Chart Book: Closing 3 trades….looking ahead in the S&P

We closed 3 positions last week (TTWO +21% (boom!), AMZN +4% & ABBV -7%), essentially nailing the lows in Amazon to get out of our short position at $1,680. Our S&P forecasts for the last couple of weeks have been really tuned into the markets.  We said last week “2,720-2,730 is the next support level that we see.  This area could produce a decent bounce…” – The low in S&P turned out to be 2,728 and has since traded over 140 points higher!  The reaction was stronger than we anticipated, but nonetheless, we were prepared to profit from it!
Where do we go from here?  We are looking for the markets to correct lower in order to further position ourselves for another advance.  We see pullbacks to 2,800-2820 as likely and certainly a buying opportunity.

Our thought of the week is in the spirit of the NBA finals (Let’s GO Raptors!)  Let’s talk about the importance of defense.  You’ve likely heard the saying– cut your losses quickly and let your winners run. Well, this is true and a big key to success, but as with any successful habit, it’s easier said than done!

To accomplish this you need to have a few things ironed out:

  • Need a defined trading strategy – that’s why we love Elliott Wave so much (the knock on EW is that it’s too subjective, 5 traders can have 3 different views…to that I say, WELL OF COURSE!  If it was that easy, everyone would be making money!).  The point is that it gives you a framework to build on, what you do with it is the key to building your craft; this takes practice.
  • Throw your ego out the window – in trading, your ego can really get in the way of your success.  If you are afraid to be wrong (i.e. close a trade for a loss), then you will always find yourself taking big losses and likely smaller winners – this is generally not a recipe for success.
  • Reduce your stops and always manage your positions – when the market gives you an opportunity to reduce your risk, take it!  This goes back to having a defined strategy to work from.  If you take a small loss, so what, move on to the next trade and DON’T LOOK BACK.  Be disciplined in your approach.  If you have 3 losing trades for 5% losses in each and 1 winner for 20%, guess what, you just made 5%!  Even though you were only “right” 1 out of 4 trades.  So you need to ask yourself, do you care about being right or do you care about making money?

Let’s dig into our open positions (and practice what we preach by reducing some risk exposure) and review new ideas for the week…

Running Total of Our Closed Positions: (net % moves of the stock)

1. ROKU –  Gain of 35%
2. CRON –  Loss of 8%
3. TTWO – 15% Gain (1/2 size @ 8% & 1/2 size @ 21%)
4. CVNA –  Gain of 17% (1/2 size)
5. ABBV –  Loss of 7%
6. AMZN – Gain of 4% (1/2 size @ 2% & 1/2 size at 6%)

Open Positions:

1. TTWO (Long from $93) –  Excellent trade – taking an average of 15% profits and exiting our final half position at $113 this week. We may look to re-enter this position on a corrective move lower to around the $104 area and will certainly let you know if we do.

2. ABBV (Long from $81) – We were stopped out at $75.50.

3. CVNA (Short from $72) – We’ve given back some profits since last Monday on our remaining position, but still in good shape.  We are going to lower our stops from $70 to $68.50.

4. URA (Long from $11.60) –  Currently trading at $11.86, we are going to reduce our risk by raising our stops to $11.20 (~3% risk).  Looking for prices to start a nice rally from here.

5. IP (Long from $44) – Currently at $44.97.  Prices rallied last week to get us back into positive territory.  Here as well we are going to raise stops to $40.70 (~7% risk).

6. BAC (Long from $28.40) – Trading $27.51 – continue to hold.  Will re-evaluate the position if prices fall below $26.

7. CTXS (Short from $96) – Prices are back to our entry point. Holding shorts and will re-evaluate above $98.50.

8. AMZN (Short from $1,790) – Took profits on a quick move lower here and as we mentioned before, we nearly caught the short term high (at $1,851) and were able to exit very close to the lows…a great trade that allowed to us to capitalize on a corrective move lower in the markets.

New Ideas for This Week –  Navistar (NAV) & Tableau Software (DATA)

NAV – We covered this last week and post earnings this stock was up quite a bit but has since pulled back.  Not ready to pull the trigger yet, so we’ll keep watching this stock. You can refer to last weeks commentary for the chart.

DATA – We would like to enter this trade on a move lower – Looking to buy at $117 with a $106.50 stop.  Will determine profit points as the trade progresses.

If you’d like to see the previous Weekly Chart Book Updates, they can be found here: https://www.aspentrading.com/chart-books/ 

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