It has been a volatile tug of war between the bears and the bulls, and post-FED the bulls seem to be victorious. However, the major indices did not manage to go through the 8 and 21 day EMAs, and therefore caution is still required. I am still tactical in my approach with some swings overnight, but in small quantities, in order to see if there is follow through in today’s tape. Will the gaps get filled and stay that way?
The reflex reaction to Powell’s speech was a move up, and it went right at the gap, filling it. $436.56 is an important number as it is the lower part of the gap, and $441.02 is the upper end of the gap. If we reach and stay above the latter number the bulls show they are back in play: Risk can be put on.
We have a similar story for the $QQQ, as the gap started to get filled at $369.25 and is considered filled at $372.76. If we fill the gap Big Tech gets a strong tail wind and you can start long swings against this number.
We come back to Tesla once again, since it was one of the strongest stocks out there during this turbulent week. It stayed above the moving averages, with small dips to the 21 Day EMA, but it quickly recovered. We are long this stock and some options because if the bulls come back this stock should push through last week’s high and be a source of cash flow. See how it handles 760-765 if it gets there.
I have been long this stock the whole week since it did not break the levels, or come out of the pennant formation. This paid me yesterday when it shot out of the pennant and increased by 4%. I trimmed a good portion of it and I kept the call options and half of the stock for continuation today. The reopening stocks proved to be impressive this week in the aftermath of the travel relaxation news. However, I have combined news with technical analysis and got paid for my holding pattern. $RCL is similar to Norwegian Cruise Lines, and you could also try this one today, I bought some option calls in this as well, as I do not wish to be in too many stocks with the $SPY still under the moving averages.
My mind is on gaps today. Why are they so important? Because if gaps get filled and indices get above moving averages risk can be put back on and shorts are getting squeezed. This means we can put money at work and enter the beautiful world of a new active sequence. However, if the gaps don’t get filled and the bulls have no power expect a sharp fall, worse than the previous one. I am still emphasizing patience and caution today, but with a dose of optimism.