Pre-Fed rally and Bitcoin’s inverted head-and-shoulders

Good morning fellow traders and welcome to a new day on Wall Street!

Yesterday, we had an impressive gap up on news that Russia started to withdraw part of its troops from the Ukrainian border. Futures immediately jumped 1.5% and continued a sustained rally throughout the day. We managed to take advantage of this situation by looking at some of the strongest stocks that managed to stay above Monday’s highs such as $AAPL and $TSLA. $FB offered a good opportunity to get long as it made a double bottom around $215. $AMZN and $GOOGL were weaker than usual but did not fall apart either. Last night, we had earnings reports from $ABNB, $UPST and $RBLX. The first two easily beat estimates and offered good guidance, while $RBLX disappointed. We had call spreads for all of the above and will look to book the profits from $ABNB and $UPST. Tonight is a big earnings report from $NVDA, which had an impressive rally yesterday. Depending on the results, it will be interesting to see if the semiconductors can re-claim some recent lost momentum.

After yesterday’s impressive gains, futures are flattish this morning. Today’s main focus will be the FED minutes, which will be released 2 hours before the closing bell. Yesterday, PPI readings came in hotter-than-expected, showing that inflation remains the main headwind for equities. Given this situation, we expect the FED to continue to have a hawkish stance, which will be detrimental on the short term for most stocks. We continue to advise being cautious and tactical.

Our focus today will be on trimming into strength what we have accumulated in the past 2 days, as we are approaching important resistance levels in the $SPY and $QQQ. The small caps and biotechs have started a new active sequence and it will be interesting to see if they offer any continuation. Last night we went long $AAPL, $FB and $TSLA and continue to hold some $AMD and $NVDA call spreads. Keep an eye on $BKKT in case crypto continues the recent uptrend. Bitcoin created an interesting inverted head-and-shoulders patter which, if materialized will take the price back to $50K+.

$SPY chart

The overall market is at an inflection point here. The next big resistance area is $450 with support at $443. A break in either direction will put either the bulls or bears in control. See how everything changes with the FED minutes later today.

$QQQ chart

Tech has been leading the market higher in the past few sessions. Strength in $AAPL, $TSLA and $AMD helped the $QQQ push above $354. For today, a lot will depend on these leaders to see if they can continue higher. The next big resistance area is $360, with support at yesterday’s low of $351.82.