As we expected last Friday, we had an inside day in the markets despite a weak start to the day. The bulls managed to regroup and showed commitment to Thursday’s rally. There are several catalysts for this week, which might add some volatility. The end of the quarter this week will make investors reposition for the beginning of next one, as some might adjust their portfolios accordingly. In addition, by Friday, Congress needs to avoid a government shut down, while consumer expenditure numbers will be published at the end of the week, another important gauge for inflation. We are cautiously bullish going into this week’s action, and will look to trim into strength and buy a dip as long as key support levels are held. There are several igniting candles from Friday which might offer some continuation, such as $SNAP and $TSLA.
Please find below the most important charts of the day:
The overall market is looking healthy once again above the exponential moving averages. For today, see if the value/reopening plays continue to outperform the tech sector. For support, holding 443 would be very constructive. Pivot resistance is at 444.67. Futures are up, so make sure to trim some positions into strength.
$TSLA managed to clear the recent channel once it cleared 765. We have been long both options and the stock and this helped our portfolio on Friday. For today, the next resistance area is 780. Holding above 765 keeps the bulls committed to the recent move. We bough a new call spread for this week $770/790 in case it offers some continuation.
$GOOGL is still the best performing tech stock as it managed to avoid a big dip given the market weakness last week. On Friday it managed to clear the moving averages as it is looking for higher prices once again. We put on a call spread for November in case it has a pre-earnings run. 2869 is the next resistance level.
The biotechs are on our focus for the next quarter. A new active sequence is in its infancy. The chart is looking very tight above 130. Historically speaking the next quarter is very strong for this ETF so keep it on your radar. One way to approach it is to buy $136 calls one-two months out in case of a bigger move. Several bio conferences and earnings are expected soon, which might provide a necessary catalyst. 128 should provide some support, with 133.19 the next big resistance area.
Continue to stay tactical, book profits and manage your existing positions as the market continues to be very narrow. With more than 40% of stocks below their 200EMA it is clear that the overall health of this bull market is not great. Look for profitable setups and use tight stops in case the tape moves against you. Remember that the trend is your friend and for now the bulls are looking for higher prices.