- Going to discuss whether it’s the wrong time to buy stocks now
- Also discuss how to understand when it might be a better time
- Will use Fibonacci retracement tool to analyze this
- Goal is to keep things actionable for the community
- S&P 500 hitting 5,000 level
- Represents a 15 week rally without a significant decline
- Questions whether now is the best opportunity to buy stocks
- Not calling a top in the market
- Difference between believing market is ready for a short sale versus actually being bearish
- Personally moving up trailing stop losses
- Big economic data coming out this week
- Some stocks are very extended right now
Fibonacci Retracement Tool
- Shows depth of pullbacks during a bullish rally
- 50% retracement is deepest level would consider buying
- Shallower pullbacks indicate stock is well bid by institutions
- Can use tool on any timeframe (5min, 5 years etc.)
- Entry in 24% box would feel comfortable as stock is well bid
- Deeper pullbacks would warrant less aggressive position sizes
This Week’s Outlook
- S&P 500 hit milestone level of 5,000
- Lot of economic data this week
- Could see some profit taking if data just “okay”
- Watching CPI, retail sales, jobless claims, PPI
- Need better than expected data to justify 15 week rally
- Not predicting a top, just preparing for a pullback
- Now have retracement levels to guide entries
- Gave breakdown of sectors and stocks looking at this week
- Based on sector rotation and stacked order flow
- Hard to find new stocks without a reasonable pause
- Moving up trailing stops in current positions
- Be aware of economic data this week
- Leave comments/questions and will respond
Everybody, welcome to Stock Trading Pro.
Today’s episode of stocks for breakfast, we’re going to break down whether or not it is the absolute wrong time to be buying stocks right now, and we’re also going to talk about how to understand when it might be just a little bit better, moment in time to to find the best stocks to buy now.
We’re going to actually use we’re going to dive a little bit deeper into the Fibonacci retracement tool, and keep it super simple.
I’d like to keep things actionable. That’s one of the biggest things we do in our community. There’s so much information here on YouTube and everywhere else that, you could watch a 1000000 YouTube videos and end up being more confused.
What I really want to do today is help you understand a very simple way to understand a concept, that we call well bid. And essentially, it means how deep a pullback happens in a bullish rally.
Now we’re obviously going to talk about the S and P 500 hitting that 5,000 level, what that means for new opportunities to buy stocks. Is now the best opportunity to buy stock, or Should we be waiting for a better risk reward ratio?
That’s really a big thing that we’re going to dive into. So we have a ton of stuff to cover today. Obviously, it’s Monday. A lot of economic data coming out this week, some important economic data.
We’re actually going to do a breakdown as well. You’re going to want to screenshot that part of what we talk about today because it’s actionable leading into what could influence the Fed and Jerome Powell to make their next decision.
I think everybody pretty much is at the point now where they don’t think anything’s going to happen at the next one, but the one after that is when everybody’s expecting rate cuts to start happening.
So we want to kind of dive into the economic data, kind of level up our stock trading knowledge so that we can really understand all the buzz around, around the economic data, and more importantly, how to use it, how to interpret it, and how that should affect profit taking strategies, and that’s really the bulk of what we’re looking at right now.
I think we have 5 swing trades on the board right now. One more that we’re looking for today, but it’s actually going to end up being a short sale today. And the reason for a short sale today is I’m not calling it top in the market.
I want to be super clear about that. There’s a very, very big difference between believing that the stock market is a short sale versus believing that the market is bearish.
Very, very big difference, and getting out of or moving up trailing stop losses, is is very, very different from picking a top, and we don’t want to pick a top.
That is probably one of the worst ways to try and make a living or to see session.
Might be right once out of 10, but the other 9 will wipe you out. It’s just not worth it. If you take any suggestions from me, bottom fishing and top picking is just not a consistent way of doing things.
It works once in a while and you feel good about it, but it’s trust me, I did it early in my career. It’s not good. So stick around.
I’ll be back in just one second. We just gotta get this up on the screen. Okay. So thank you so much for being here with me today. Just If you could do me a favor, if we do a good job today and we earned it, do me a favor.
Give us a thumbs up and make sure that you subscribe. It would mean the world to me, but it also would Let me know what kind of information you like.
So the big thing we’re going to talk about today is, the s and p 500 and hitting that 5,000 level. We’re going to kind of work our way into new opportunities.
We’re going to break down the market as well. So you can see here the SPX is now over that 5,000 level. Came pretty darn close on, Friday. Actually hit, like, right on that level, but today, we actually kind of burst through.
And now the question comes in, what and we’re going to use the, Spy ETF here. The question comes in now, if we start to break down the market and we start to look at sector rotation, where are the opportunities?
Now you can see actually here technology across the board is green. Every stage of order flow looks pretty darn good. So the biggest thing I want to get across here is we are not talking about whether or not the market is bullish or not.
The stock market is ripping. It’s a 15 week rally right now with I think there was an article in the Wall Street Journal on Saturday.
We were going over, on our weekend, swing trade session, where this this is the one of the largest moves without a decline, a significant decline in decades.
Just absolutely amazing. So I want to tell you what I’m looking to do at this particular point and my level of aggression, so to speak, with looking for new opportunities.
So at this point, obviously, the stock market is bullish. There’s massive buying pressure at this point.
The bigger question right now, and to kind of get away from that fear of missing out, just do things in a logical way that makes sense, which is if I choose to buy stock right now, is the next likely move going to justify the risk on that new idea.
That’s kind of like the technical definition, but it really means if I accept risk, is the reward likely?
Now likely versus the next move is not the same thing. Okay? That’s very, very important. So I want to kind of walk over to the S and P 500, and I want to give some actionable stuff of what I’m looking for for the next move.
So I just want to be super clear about this. I am now moving up my trailing stop losses. We got Some big economic data we’re going to talk about in just a second, and we have the S and P 500 hitting that 5,000 level.
There’s some Psychological stuff going on right now, some way overextended stocks. I think probably SMCI, just absolutely, amazing right now.
Congratulations if you happen to have it from low levels. This stock on January 18th, so not even a month ago, was in the lower 3 100, right around 313, and now it’s it’s printing 750 pre market this morning.
This is the kind of move that If we kind of measure this out, and we’re actually going to start from over here.
Excuse me. We’re going to use the Fibonacci retracement level. You could use it in whatever software you’re using. And by the way, you could do this. It doesn’t matter if it’s a 5 minute chart or a 5 year chart.
It doesn’t make a difference. Basically, the same thing. So we can actually see here from starting from this move where we kind of paused over here and took off, generally speaking, the color of the boxes here.
Let me actually get these guys off the screen here. The color of the boxes are the depth of the retracement.
So now I want to hit you with a little bit of trader lingo here. Okay? So when we have these retracements, what we are looking to do is to basically get a measurement of the strength of the prevailing trend.
So in other words, if we have this big move to the upside and a stock pulls back and then starts rallying in that direction again, how deep was that pullback? Now I want to tell you how I use that.
First, we’ll we’ll get into the indicator in a second, But, essentially, what that tells me is that and I’m going to show you, Abercrombie and Fitch, Fitch as this as as a pretty good example, but we’re going to use it in the S and P to to kind of set up the next trade, and then we’re going to get into, sector rotation and looking at some ideas heading into this week.
So, essentially, What happens is when there’s buying pressure, you know, there’s usually a push and a pause, a push and a pause.
Right? That kind of thing. We really have not had any significant pauses for a while. Right? We’re going to measure the S and P 500 as well.
But what we’re looking for is we’re looking for a spot that if we buy, we’re comfortable with the risk, and the next likely push justifies accepting that risk. And that that’s a really big part of trading.
Right? Trading is about revenue versus expenses. Revenues learning how to make money and make profitable trades. Expenses are sometimes we have to take losses on trades, and that’s just the cost of doing business.
Right? But our job, the more experienced we get, we do a better job of setting up trades where the expenses are lower, and we eventually learn how to make more on the winners.
So if we could kind of bring that into focus over here at SMCI and basically in this move that’s pretty much from 300 to now 750, What we are looking for is a reasonable decline to set up a buying opportunity where we’re comfortable with the downside and the next likely move justifies that risk.
Now these boxes, these colored boxes essentially represent the depth of the pullback. Now there’s a lot of levels in there, but I just want to point out the one that matters the most to me, which is the 50% level.
So very similar to the 50 period moving average for swing traders, the 50% level basically measures the depth of the pullback, which is half of the move that we’re measuring.
Now that, similar to the 50 period moving average, is the deepest that I’ll be looking to even consider buying.
And look at how far the that way that is. That’s just that’s $375. That’s how far away and how fast the stock is moving to the upside, which is also why we’re talking about fear of missing out today.
So to give you metrics, right, one thing that I want to point out here is, Again, we’re going to kind of talk about, trading lingo here, and I hope you don’t mind because it’s always kind of fun to be, educated in a way that you actually understand kind of what you’re doing and how you and what you’re talking about.
So what we’re talking about now is tape reading. Tape reading by its very definition, and I get this definition 100% credit given to Linda Bradford Rasche.
I probably Got this at a at a New York Traders Expo in the late nineties probably, where she basically says that tape reading is your stock is moving closer to or further away from a significant reference point.
Now that’s that’s a mouthful.
Right? But it basically means You you have a spot and you’re measuring the distance away from that spot. Now you know how to read the tape already because When you’re in a trade, nobody knows that stock better than you.
If it’s going up or going down, you have a reading on that stock. What active advanced stock traders try and do is have those reference points before the trade so that they could then justify risk reward in the direction of that idea.
So what Fibonacci levels do or moving averages do for the same thing is it’s giving you a reference point for a pullback. Now what’s kind of cool about using Fibonaccis is they are you know, it’s kind of these really convenient levels, 23.
6% of a pullback, let’s say 24%, 38%, and then 50%. So the thing I want you to write down is 50% is the deepest that I would ever consider buying a stock in the direction of that trend.
Now here’s the most, I think fun part about it. So if we look at this box here, which is basically 24%, if I get an entry in that box, I would feel pretty good because that is what we would call well bid.
Well bid essentially means that it was not able to pull deeply back and started back in that direction or even went sideways.
So, essentially, what that means, if you could kind of visualize this, let’s, let’s use Gavin as an example. So let’s say Gavin owns a hedge fund, and he really wants to buy a particular stock, and they’re doing it slowly over time.
Like, they’re accumulating that position over time. They’re always going to have a bid in the market. They’re not necessarily going to be paying up unless they need to, but they’re going to have a bid in the market.
They’ll be advertising for some of the shares that they want, and it’s going to be a persistent buying pressure, but they’re not necessarily paying up yet.
So if the stock pulls back but can’t go down, so in other words, it It goes up and sideways versus up and pulls back.
That means it’s well bid if it goes sideways, and that’s a that’s a an easy way to recognize a stock that’s under accumulation.
Okay? Just just to use some really high level language. Okay? Now, again, there’s a lot more to this, just kind of giving you the high level so that you can actually use this right away. That’s really a big part of what we want to do.
So the shallower The pullback that resumes the trend, the better bid that stock is by institutions. They’re actually holding the stock there. The deeper the pullback, they’re letting it pull back because the demand is not as strong.
We can still look for opportunities, But here’s the here’s the big the big thing, and this is kind of really when we get into win loss ratio and position sizing, and Position sizing is more important than win loss ratio.
Let’s just get that out of the way very, very quickly. We get so many people to reach out.
What’s your win loss percentage? It doesn’t matter. As long as you have a good expectancy and have the right position size on bigger trades, Better trades that have a higher probability, less shallow pullbacks, that’s what matters.
Having more shares on better ideas is what matters. So you can have a 35% win loss ratio and still have a really good profitable month, quarter, year, whatever you want to call it, if you sized up and held longer on the good ideas.
And you don’t even need to size up, but that could that could skew it in your favor much bigger even if you just have a way of managing profits correctly, kind of like what we’re in right now with the market.
Okay? So essentially what we’re looking at in these levels in SMCI.
For me right now, I’d be more comfortable looking for an area around here. So from 6. 40 or higher, which is a $110 less than where it is right now. We’re basically resetting the optimal entry.
That’s really the biggest point that I want to get across. So what I want to get across here is this. We on our channel here on Stock Trade Bureau, we talk about optimal entry and profit maximizer quite a bit.
There’s Four parts of our system. There’s order flow stacking, which is identifying institutional activity, and we try and shadow that.
The second part is tape reading, which is determining, is the current price action in the time frame I plan to trade in the direction of the higher time frame in the direction of that dominant order flow.
That’s a mouthful too, but I want to kind of stop and really make you understand what I’m talking about.
So let’s say you go into the day and you want to be buying a stock. Now let’s just use 2 very simple examples. Okay? So let’s say you’re a day trader or a swing trader.
If a stock is bullish, is it above today’s opening price or VWAP, or is it below? So right now, we’re measuring bullish going into the day, but maybe right now, it’s below VWAP or below the open price or however you decide to measure.
Maybe there’s stochastics or whatever. Is your reading on the time frame that you plan to trade matching the higher time frame dominant buying pressure.
This is where a lot of traders get into trouble and can’t figure out why they’re not making money because they are not using a progression of this is perfect.
And as we move away from perfect, that has to make us adjust our position size. So tape reading is whether or not that current order flow in the time frame you’re trading is in the same direction as the higher dominant time frame.
So for example, the last 15 weeks, massively dominant. But what if you want to go into that day or that week and it just keeps going down?
Well, that’s not doing what you want it to, so you would either trade less share size or wait for what we’re talking about now, a Fibonacci level that the stock might pause at.
So we can kind of look at that again. 640 or above. I would love to see this thing pull back a little bit, kind of like this actually, almost identical to this, and then kind of close near the high, resetting a new move.
Now if it pulls back a little bit deeper or even the deepest part that I would look for, which should be the 50% retracement. I would still consider those ideas, but those ideas would have less initial position guys.
That’s really the big thing I want to get across. So when you’re using a Fibonacci retracement tool and I I happen to like this one over moving averages to look for a new spot to buy just simply because the visuals.
It’s like there’s a level and there’s a level and there’s a level based on the trend that we’re actually measuring.
So the deeper the pullback, even if it still meets that criteria above the 50% retracement level, I will go in with less position size because it was able to pull back that far.
So that’s what we want to talk about. So when we’re looking at this, I want to give you a visual, you probably want to screenshot this.
When we’re looking at this, if we are in the shallow box, which is 24% retracement or less, I would tend to have a little bit more initial position size, and you can see here it didn’t pull back, and that would be more aggressive position size.
It went up and basically pulled back for one day. That would be a little more aggressive position size.
And now we kind of went sideways, but now we’re kind of, a $125 beyond where the last move started. So I want to give you an example right now in Abercrombie and Fitch where you can actually see this pullback that started.
So we’re a little bit late on this entry, but I want to give you a visual. And first of all, How amazing is that trend?
How many people have been watching this stock since last year? We’re talking about 32 to a 112 boring Abercrombie and Fitch. Right? But let’s We go from the most recent move where it kind of went sideways here for roughly 3 weeks.
So let’s just kind of pull that in here again. And I I do want to show you because you can actually do this on any time frame. I’ll I’ll give you an example in a second.
So now we have the levels here where the 20 4% retracement is right around 98 ish, like, kind of right in that almost exactly at 98. So that would be the next level that I would be comfortable above or better. Right?
Now what’s kind of cool about that is you can actually see that it rallied, pulled back, and had what might a lot of people would know is a bottoming tail or whatever candle language you like, and that bottoming tail is basically the new optimal entry above the least shallow pullback.
And you can see we actually just it kind of pushed pushed pushed up and retraced that high.
So right around that area, 104, 105. So, basically, it’d be about $5 late if you were looking to buy it right now, which kind of actually brings me to another point, which is why we’re talking about fear of missing out today.
If you decide that you want to be buying some of these stocks after the move has started, this is when you need to make another decision on position management.
So, again, remember, everything we’re talking about here is for educational purposes.
It’s my job to kind of like just make you think differently that every trade is not the same And if every trade is not the same, then it’s just logical that every trade should not have the same initial position size.
Now we can build our way into those positions.
So for example, when we talk about position sizing and we look at technology, which has stacked order flow across all three stages that we look at for swing trading, that’s a little bit of a better idea than some of these other ones that really don’t have at all.
So I want you to write this down because this could make a really, really big difference.
And, again, talking about fear of missing out and which stocks to buy now, Some of these stocks are obvious, but what’s the next level distinction we need to make is what is the right amount to start a new position with, both from a capital allocation position perspective, and I just want to really make you understand what that means.
Okay? Capital Allocation is basically the real risk on an idea is the quality of the idea.
So we have order flow, which is how obvious it is, how long has it been obvious, and has that kind of been affected into other sectors and industry groups.
In other words, is it just one stock that looks pretty good? Okay. That stock has institutional attention.
Or is it that one stock and then 10 other stocks in that industry group also? So that means, let’s just say I’m not sure who RSI is, let’s say RSI owns a hedge fund, and is his hedge fund or her I’m sorry.
I don’t know if it’s a man or woman. Is there a hedge fund buying that entire sector? So you have one stock with order flow, then you have a sector with order flow or maybe an industry group.
So I want again, I want to give you a visual of this because it’s kind of fun. This is really where the treasure hunt of, trading kind of unfolds, where you’re kind of building clues for better decisions.
And then once you find kind of, like, the right pond to go fishing in, then the next step is what is the right initial risk, the initial allocation.
I want to give you some numbers And these are not hard and fast rules, they’re just they’re just a delineation to give you an idea that there’s you need to qualify your trade differently.
Do I love this trade? It’s amazing. Everything is lined up. So maybe you take a 5% allocation of whatever you’re willing to risk on that idea.
So let’s say for argument’s sake, you have a $50,000 trading account and you decide to break that up into 2 trades. So 2 positions. Right? So that’d be 25,000 allocated to one position and 25,000 allocated to a different position.
Then we would take, let’s say, 5% if we really like the idea, and then we kind of reverse near the right share size, which is the risk amount with the, entry and the stop loss.
That kind of gives you the share size. So for example, If we were going to risk $500 for a $1 stop loss, that would be 500 shares. If we’re going to risk $500 for a $2 stop loss, that would be 250 shares.
So you kind of understand? So the allocation in the idea of 5%, 3%, 1% is really based on the quality of the idea and which is the third part of what we do, which is the optimal entry, which is timing.
If you’re buying it at the perfect moment and it has great order flow, You could probably get in there with a little bit more initial position size because you got the idea and you have the timing down, just like I showed you in a couple of ideas.
ANF actually was the perfect example there. And the 3rd part, obviously, is what if we’re a little bit late? What if we buy 3, 4, 5 days after the fact.
And now, like, a lot of people are having fear of missing out on some of these ideas. We have two choices. You You can use the Fibonacci and wait for it to pull back a little bit and then look for a new entry.
Or, now this is really important, If you are chasing the stock a little bit and it’s a little bit late to be a buyer of that stock where it’s obvious, but it’s already rallied 10%, 15%, 20%, but you’re like, oh my gosh.
I need to get involved because I’m going to miss out on this amazing move. What if it keeps going?
If you can admit that you’re late and for whatever reason, right, and it’s rallying and it’s taking off with you like SMCI and NVIDIA and a whole bunch of other amazing, amazing semiconductor stocks right now, That would say the idea is good, but we’re a little late, so that would kind of move us away from perfect because perfect includes Are we getting it at are we buying at the moment of the greatest risk reward?
So in other words, the the risk is justified because the next likely reward is Pretty good. Right?
And I really hope that these simple terms are kind of, like, waking you up a little bit to just a different way of thinking about the stock market and trading stocks Because when you when you have to admit to yourself every trade’s not the same, and it’s those it’s it’s just learning a little bit more to say, do I step on the gas, or Am I a little bit late?
Right? Those kinds of things. So as you work your way over it and away from perfect, your position size on the initial entry It’s just smarter to have a little bit less position size because it’s already gone a pretty decent distance.
So you’re actually kind of expecting a pause. Right? But I want to give you a little bit deeper insight into sector rotation.
So part of what we do, every day is as we kind of break down the stocks that you could actually see here across multiple time frames, and then we take a little bit of a deeper dive into which sectors have the most stocks with stacked order flow.
And, obviously, right now, you can see, technology with the biggest list. So that kind of works our way into which ideas have institutional attention, which would then translate into which ideas should I have attention on.
Well, if the big money is buying it, why would why wouldn’t I just join them? It’s a lot easier. Then we kind of go up a little bit, a little bit further up the chain.
Once we know the sector we want to be looking at and then learn how to time our way into those ideas, then we could work our way into what is known as an industry group, and then you can see that they’re much, much more diverse.
Now these particular industry groups here, Software application stocks and software infrastructure have been very, very good, and and and in a way though I’m saying they’re very Obviously, bullish, but giving us a little bit better entries that we might be getting in, some of the semiconductor stocks.
Even though semiconductor stocks are strong, they’ve been kind of like flying without us or or you had to get in at a lower level and kind of work your way into the position. So I’m talking about semiconductor stocks now.
I’m not talking about when they broke out. NVIDIA had probably one of the cleanest, breakouts, that we’ve seen in a long, long time, which was that $500 breakout, like, right here after it was kind of going sideways for a while.
This breakout level is the optimal entry, obviously, especially with the size of that candle and the volume that kind of pushed through there.
So you can kind of visualize now if we even if we just use NVIDIA from 500 and kind of go back to that Fibonacci retracement, we can get a pretty good feel of we’re pushing and we’re going sideways, we’re pushing and going sideways.
We’re pushing and going sideways, so you can actually kind of visualize now what I just taught you about holding the bid.
It’s pushing and going sideways as opposed to pushing and going down. Right? Very, very big difference. And we gapped bullish gap bullish gap bullish gap sideways, and now kind of going higher again.
So For me personally, kind of within this window, we’re talking about that would be where we would feel comfortable still being a buyer with conviction, for lack of a better way of putting it.
And, again, we’re not talking about balance sheets and all that kind of stuff.
That’s a whole other video that we’d be talking about, earnings reports and interpreting guidance and all that kind of stuff, PE ratios, EPS, whether they beat expected, all that kind of stuff.
All we’re talking about right now is the most efficient way of recognizing the depth of commitment from somebody strong enough to push that stock up and hold it there.
I don’t care what you call it. I don’t care if you call it smart money. It doesn’t make a difference what you call it.
The only thing that matters to us is how we recognize the stock that is pushing up and going sideways, which means somebody’s holding it there, and then eventually they’re paying higher prices.
So what we just talked about with the Fibonacci tool is a way of recognizing price levels that will take that to the next level, which essentially means don’t you hate that that phrase. Let’s take it to the next level.
I hate that, but it it kind of fit in this particular, circumstance, which is it will tell us which levels we pull back to, and then that translates into what is an appropriate initial risk based on how far it pulled back.
Now what’s kind of fun about that, again, if we go back to NVIDIA and a lot of these stocks, you can see they really have not pulled back that deeply at all, which Until that changes, this is still a pretty good idea.
Now at this point, it’s just a question of an optimal entry.
Okay? So I just want to kind of get that in there. So moving on to some of the other ideas heading into today and especially heading into this week, we’re going to get into We’re going to get into the economic data in just a second.
But if we kind of work our way through, and we could take a look at some of the Sectors and the hang on.
Let me actually fix that. We get into the sectors and we take a look at what’s going on for the last few weeks. Right now, we can see that health care and industrials have had the strongest order flow over a 5 day period rolling.
So this is kind of where, like I talk about going on a treasure hunt for looking for stocks to buy. There’s multiple ways of hitting this.
1st, we want to look at our primary metrics in the market, which are obviously advanced decline, high load difference, and we have a proprietary one, 20 day breakouts versus 20 day breakouts, and you want to see the consistency there.
Then you want to work your way over into sector rotation over multiple stages of stacked order flow, then we kind of work our way over into which sectors have the dominant amount of stocks with stacked order flow, and then only then do we start to look for opportunities.
So if we could kind of give you a structure for how to put the pieces of the market together so that you can have absolute conviction that you understand what you’re following, There is order flow, is it dominant, and where is it dominant, sectors and industry groups, and how long has that been going on?
So we have 4 different stages of stacked order flow. Then there’s tape reading, which is, am I timing my way? Is it going in that direction right now?
So you have a pullback in the stock versus the stock is going up. If it’s going up, it’s already in motion, you probably want to be looking at those first because the pullback can just continue to drip down.
Then we talked about using a simple tool like the Fibonacci retracement tool to determine the depth of the pullback, which then helps you determine your initial risk in that idea, and then only then after these profitable trades end up unfolding, assuming that they are moving in our favor.
Remember, there’s trading losses and trading, wins.
Wins are the profit for our trading business. The expenses to run the business are losses, so don’t beat yourself up if you made a good trade and it happens to be a losing trade. Doesn’t always mean you did something wrong.
That that’s just a part of running the business. Any business just happens to be trading losses are the business expense that we need to pay in order to run our business profitably because you can’t you have to risk money to make money.
That’s just how trading or any business is in the real world. So, by the way, if anybody tells you they never have losses, sprint in the other direction. That’s just not reality.
So what I want to do now is now that we have kind of like a framework for what we’re looking at, I want to go a little bit deeper now into some of the ideas that I’m looking at this week and I’m kind of game planning out this week.
You might want to watch this more than once. If you want, you can screenshot it. I’m going to go down the list, of some of the ideas.
First, I want to start out though with a really hot topic, which is market breadth. And market breadth is essentially how many stocks other than these giant Microsoft, NVIDIA, Berkshire Hathaway, Apple, Amazon, Google, Meta.
We’re looking for some more stocks and some and some better, buying pressure spread out over a bunch of other stocks.
So this is basically the last 4 weeks of trading. It’s okay. It’s not green across the board like you might see in a in a raging bull market where the market’s making new highs, but nothing’s changed yet.
So I want to be clear. When I’m talking about fear of missing out, we’re talking about buying too late. We’re not talking about whether or not we’re bullish. There’s a very big distinction between the 2.
So the other thing we want to talk about today is obviously the economic data that’s coming out this week. So first, we’re going to start here and take a look at the economic data. We have CPI coming out scheduled for tomorrow.
Obviously, the primary gauge that the FOMC, Jerome Powell, the Fed are going to look at for making decisions on, interest rates. Right? So, obviously, they have kind of pushed that off again, but this is a big deal to know.
So what we are potentially looking at this week with the CPI data, with retail sales, with the initial jobless claims, and then PPI on Friday. We’re kind of lining up in a way where the S and P 500 hit that 5,000 level.
All this economic data’s coming out right now. This week, just after while the S and P is hitting that number, There’s a chance that we’re going to get to a point this week. We’re going to start to see a lot of headlines.
They’re going to say, well, that was okay, But does that justify us continuing to have this raging 15 week bullish move right now where we justify the valuations, we justify the bullish tone, and you might see some people taking some profits off the table.
Now there’s nothing wrong with that because we just talked about we just we kind of set up this entire conversation with, Okay.
Fine. If we pull back a little bit, we now have levels that we can look at in any individual stock that we are trading.
And whether it’s a day trade using a Fibonacci level or whether it’s a swing trade using a Fibonacci level, it doesn’t matter.
You’re measuring a trend that you’re trading. Okay? So I just want to kind of give you the context of what, you know, what I’m thinking this week is we have that big milestone on the S and P 500, that five thousand level.
We have some big inflation data coming out this week, and we also have, manufacturing numbers coming out this week. It’s going to give us a little bit better pulse on the economy.
So remember, you you might have seen a few stocks last week that actually reported decent numbers, but kind of got clobbered after reporting those numbers, it’s all expectations.
That’s really it’s what was expected and what we happened and and how do those two things kind of hit together. Right?
So what I’m implying to watch for this week or maybe not even implying. I’m explicitly saying what I’m watching for this week, If the numbers come in in line, like, that’s the, you know, that’s the number, like CPI, PPI, retail sales.
If those numbers come in line and not for and are not blowing anybody out of the water with, oh my gosh.
Those numbers are crazy. That will be interpreted as good but slowing down, and that could be another catalyst for a little bit of profit taking.
So I’m just kind of setting the tone because it’s really more important to know what you’re looking for and know what you plan to do than it is to predict.
You don’t need to predict. You need to say that’s what I’m looking for. Is it there? That’s so much less stressful.
So when these numbers start to come out, which they start 2, Tuesday, 8:30 in the morning, premarket, an hour before the market opens, with just to give you a little bit of a snapshot of that again, CPI, that’s the start, 8:30 tomorrow, scheduled for tomorrow, February 13th.
Crude oil, not really a big one right now. They’re they’re still kind of in a trading range. Retail sales, big. Jobless claims, big on Thursday. Manufacturing and more retail sales and then PPI on Friday.
So, basically, what that means is that there’s some pretty decent numbers for us to be aware of this week, And in order for this 15 week amazing rally to continue, those numbers are going to have to be better than expected.
That’s essentially what we’re talking about. So when we talk about fear of missing out, you have to know what’s coming out in order to determine, is it too late to buy?
And we kind of tie that into understanding levels, resetting that optimal entry, and feeling a little bit more comfortable with looking to buy if we do pull back and where.
Now Now the big thing I want to talk about, whether it’s using a moving average that pulls back or Fibonacci like we just talked about, you still want price action to confirm that it stopped going down.
So we just showed you before what’s known as a bottoming tail where it pushed down and then reversed. So at least you have a little bit of buying pressure that pulls back and then starts that new move in that direction.
Okay? So what I want to kind of finish up with here is just giving you, some ideas that I’m looking at this week heading into based on sector rotation, based on those 2 sectors I just showed you, which are technology and consumer cyclical.
Now with the GDP numbers that came out a couple of weeks ago, market’s on fire. The economy’s on fire. So it kind of makes sense that, jobs are through the roof and the economy with measured by GDP is looking fantastic.
Numbers were blown out of the water that consumers have a little bit extra money to spend. That’s what that particular sector is. Some people call it consumer cyclical. Some people call it consumer discretionary.
I think the easier way to say it’s discretionary because it’s discretionary money, there’s extra money on the table, then we have to say what companies would benefit if people have extra money at this particular moment.
Now whether you do or not, that’s a whole other discussion.
That was another, Wall Street Journal article about, if the economy is so strong, why is everybody so angry? That’s a whole other article that was in the Wall Street Journal. So I’m going to give you this breakdown.
You could you could pause the video, snapshot it, whatever you want to do, But this is at least how I’m starting my week out knowing that those economic numbers are coming out a little bit later in the week.
Okay? So as we kind of work our way through sector rotation, You could kind of see what’s going on here.
Right? And then, obviously, what we’re talking about here, 15 weeks is a long rally to not have a meaningful pause. After a bunch of scans and twisting the data in multiple directions.
This is my it’s not easy to find new stocks that I love for new entries. Very tough without a reasonable pause of declines. That’s kind of what we’re talking about right now.
And if you happen to be long from lower levels, if you bought stocks from lower levels and you’re hanging on to those, awesome. Have a plan in place if they start to pull back, and we just kind of gave you that idea.
Right? So, obviously, SMCI is, like, through the roof right now or a little bit beyond the optimal entry. NVIDIA actually did just pop out of a pause.
You can actually see a push and a pause. Friday, it kind of just pulled out of there. Now I’m looking at some other ideas that have a little bit better, reward potential and manageable risk that have not gone beyond that point.
FOUR happens to be one of those stocks that I’m looking at right now.
IBM is another good example. If we could kind of give you an example in IBM using the tool that we just talked about and kind of measure this most recent move over here.
So we’re just going to start here where it kind of started the rally, and you can kind of see that it actually pulled a little bit deeper.
So a lot of the ones that we talked about before stayed up here in the 24% level, which would have been this entry, but it never gave us a new entry.
Pulled back a little bit, but again, the deeper the pullback, I still like it. It just wouldn’t be as aggressive as if it went sideways.
So you kind of hopefully, I’ve given you a good visual here to really understand that. Okay. So IBM over 188, that’s the level I’m looking for. Abercrombie and Fitch, we just talked about that one before.
Again, consumer cyclical stocks, Airbnb, you can kind of see how I like to map this out. So, really, what I’m looking for, it continues to show price discovery around 1. 50, but 17175 is the next level that I’m looking for.
So you can kind of see how we’re talking about which of the best stocks to buy now based on the depth of the pullback, which stocks to buy now based on the sector or industry group, and then we kind of really work that way into which stocks have reward potential that kind of justifies taking the risk.
So if a lot of this stuff is new to you, I have no problem if you’d like to ask a Follow-up question. Leave a comment in the, leave a comment below the video.
I’ll be more than happy. Somebody actually asked last week, I thought it was a great question. What’s the difference between the advanced decline line and new highs and new lows, which is great.
So you can actually see that in the, previous comments as well. Alright? Got a lot going on this week. It does kind of feel a little bit like we hit that milestone.
Again, we’re not guessing at top. I want to be clear. We are preparing for a pullback. It’s very, very different from saying it’s topped out. If it continues to grind higher, we’ll continue to move up those trailing stops.
But you gotta be aware of all the stuff that’s coming out this week because it is some pretty If you get stuff that the Fed’s going to be watching, which means that we, as smarty pants in the stock market, we need to be paying attention to that stuff too.
So Thank you so much for joining me here today. If you have any follow-up questions, please do me a favor.
Leave a comment below the video. I promise I’ll get back to you as soon as I can. Let’s make it an awesome, awesome week of trading. Let’s go do it. Alright? Have a great day, everybody. I’ll speak to you soon.