Rollercoaster ride

Good morning,

Yesterday we had an impressive reversal in most stocks and indices as we reached oversold territories. As the $QQQ broke below $378, the $SPY followed suit and in the first hour it seemed that there were no bulls left. As the market stabilized and found a temporary bottom, several stocks started to show some relative strength. $TSLA, $GOOGL and $AMZN were among the first ones to start rebuilding. In order to take advantage of this early move we quickly bought some call options (posted on Twitter alerts) for these names and waited to see if they can truly reverse.

By the end of the day, the Nasdaq managed a full reversal as it closed the trading session in green. Our call options helped us navigate a difficult trading session and offer our portfolio a good start of the week. From a technical perspective, these reversals across the board should signal the beginning of a new active sequence, or at least a sideways move which would stop the bleeding from the past 2 weeks.

Today’s action will be an important tell of whether last afternoon’s rally was something more than a dead cat bounce. In order for the bulls to show some commitment, it will be vital to defend at least half of yesterday’s hammer candles and rebuild throughout the week. With 2 important inflation readings later this week, investors who were short going into yesterday, will have to start covering ahead of such binary events and therefore adding some more buying pressure.

Our focus today will be on several stocks which showed good relative strength and have the potential for some follow through today: $TSLA, $GOOGL, $RBLX. At the same time we will keep the Treasury yield on our radar as well as the volatility index in order to understand the complexion of the day.

$TSLA chart

$TSLA showed some relative strength early in the session as it managed to reclaim $1010 while other stocks continued to make lower lows. By the end of the day, $TSLA managed a powerful reversal and closed near its 21EMA. For today, a move above $1088 will put this stock once again above all moving averages. Ideally, $1020 should hold to make it easier for the bulls.

$GOOGL chart

Despite impressive quarterly earnings last autumn, $GOOGL has been one of the worst performing tech stocks in the past 2 weeks. Yesterday it reach oversold levels and quickly bounced 100 points. We are still long some call options for this Friday which already tripled in value. For today, it needs to get above $2800 in order to show some commitment to last afternoon’s rally. For support, $2715 needs to hold.

$RBLX chart

$RBLX was one of last year’s rockstars for our portfolio. Given the fact that high valuation names have been hit hardest since the beginning of this year, $RBLX was no exception. As a result, on yesterday’s selloff it closed its earnings gap to the cent. We went long the stock for a quick rebound and will look to keep it as a swing should it manage to defend $79.

Futures are currently flattish. Be careful chasing stocks off the open and wait for a confirmation that yesterday’s late rally was more than a dead cat bounce. Remain tactical and follow our recommendations on Twitter throughout the day.

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