cracks subside, breakouts across the board

$SPY last week I wrote about cracks beneath the market surface and I talked about the $SPY caught within a range between 175 to 177.50 and to stay cautious until we saw a confirmed break one way or the other. The market tipped its hand on Wednesday of this week attempting for an upside breakout and then confirmed it on Thursday as we saw follow through buying to the upside above previous all time highs. The cracks quickly repaired themselves as names we were cautious on such as $FB $AMZN $GOOG saw upside reversals all around. Being cautious was the overall recommendation for the past two weeks (and for good reason) but given Wednesday and Thursdays action this was a time to switch gears and get involved to the long side for upside continuation. This breakout looks great so far as we trend higher within this bullish channel with broad participation from key sectors such as the $XLF and $XLK. I don’t think its too late to get on board as there are still plenty of setups that are not yet extended. But as always be mindful of where we have come from and where we are now and always manage your trade risk.

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$AAPL had a slower start than some of its peers this week as we really didn’t see a breakout take place until Thursday from it’s descending triangle. And then on Friday bulls did not see the follow through they may have hoped for but on the other hand some health digestion is never a bad thing. Bulls will want to see Apple firm up early next week and price really shouldn’t crack much below 523 if it is to continue its upside move to retest the post earnings high around 536. I bought some Apple on Wednesday around 519 in change anticipating broad market continuation and I can continue to hold onto it into next week. I certainly won’t let this turn into a losing trade but I am willing to sit through some more sideways/choppy action so long as I can reason that it is overall constructive consolidation before further upside. Time will tell but for now Apple looks good to me and I will continue to hold onto my long position.

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$GOOG saw a nice breakout from the descending channel that it had been in for the past couple weeks and stopped and consolidated right where it should, near all time highs around 1040. The consolidation it put in Thursday and Friday is very healthy given the $30 two day run up it made and bulls would like to see Google make an attempt at all time highs early to mid this coming week. I bought some DEC 1020 calls right around 1018 on Wednesday and I will continue to hold them until I see signs that the bulls are not ready to continue the upside momentum. I really like the potential in this trade and I think it can be a fast move through highs and a new trend to emerge making all time highs if it can clear 1042.

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$NFLX is another name that saw some nice upside continuation to the top of this ascending channel that it has been trading in for the past several weeks. Heading into next week it will be important for Netflix to hold onto this mid to upper 340s in order to accelerate out of this channel and break into the 350s. Netflix has only closed above 350 once and that was prior to it’s recent earnings release. This is a name that could just be getting started if it can clear these near term levels and one that I will be watching close next week.

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$FB last week I talked about the potential for Facebook to put in a double bottom with its post earnings day and we saw the early makings of that unfold as it spent the early part of the week hovering below and around $46 before breaking out to the upside and flagging at the $49.50 resistance level. I got involved with it long on Wednesday morning around 46.35 and then added to the position on Thursdays dip. I will be watching this flag closely next week and I think we could easily see $51 prices if it can break back above 49.50. Looks good and I will hold onto my position so long as it can stay above thursdays lows of $48.

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$AMZN heres a name that saw a fast move to all time highs once it broke back above the breakdown level at 355. I talked about 355 being the action area from last week but I was leaning more towards a short setup if it could fail at 355, and that clearly never happened. Friday it pushed new all time intraday highs but it couldn’t quite hold onto the momentum and we saw prices fall back below the 370 level. Heading into next week this is one of my top long setups if the market can continue its grind higher and once it can clear back above the 370 mark.

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$TSLA here is a name that did not participate in an upside breakout but instead it tightened up filling out this descending triangle against 135 support. And even though Tesla lagged this past week this remains a very actionable setup going into next week if it can break above this descending trend line and reclaim the 137-138. I am not too interested in trying to jump in ahead of a possible breakout as it still very clearly underperformed this week but I will be watching it close next week to see if the bulls rotate into this name.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 20+ years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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