2019/01/06 ~ SUNDAY SETUPS

#B3-DA-3 ~ 2019/1/6 

SUNDAY SETUPS – My Sunday Routines – Week of January 7th

As traders, we want to take a look at the upcoming week at a time when we are not watching the price change.  This keeps the emotions out of the analysis.   Here is an overview of my method:

  1. Frame the S&P 500, Nasdaq, Dow, & the Russell 2000, meaning decide the expected range and bias for the week on the indexes.  If you wish, do the same for hard commodities like gold and oil.  I do this then move to #2 for stocks, and if I am not trading stocks, I skip to #3.
  2. For stocks, I look at my algorithms of my tested trading methods that I have proven successful if you use them over a great deal of time and with proper capital management.  It is basically narrowed down to 4 setups:  Alignment of timeframes (length = swings), Value in the trend (medium term), Oscillation (1d to swings), and Overages (1-3 days usually).  Pick your poison in indicators.  They all work when they do, and don’t when they don’t.  Just use what is right for your eyes in the middle of your trades, not on the weekends.  So, test your strategies through real trading, and look at ONLY the trusted methods on the weekends.  If you are like me you will want to automate all of this, and that is where quantitative analysis with bots comes in handy. 🙂  I pick the best from the signalling, but if I had the money, I would take every signal I trust it that much.  This is applied to current positions as well as potentials.
  3. Whatever you plan on trading for instruments, you will now make your plans.  “This looks more prime than that, and this has more relative volume on this mover than that other one.”  This is applied to current positions as well as potentials.  Pick your names, then:
    1. Decide the starting bias for the week.
    2. Decide the target for that bias, at this target you expect either a reversal or a stall in price.
    3. Decide the price in which a price event will change your bias to neutral or reversed.
    4. Calculate the range and how much profit can be won from it, or what I call the trades’ juice.
    5. Calculate the risk you are willing to take based on that juice.  I tend to stick to 2 to 1, but some prefer 3 to 1, and 0.5 to 1 works for those that can win several more trades than they lose.  At least at 2 to 1, my normal 38-42% win percentage will profit if I stick with the plan.
    6. Ready some sort of chart-setup(s) needed to trade for the week, so that when you sit down to trade, it’s simply a task of turning on the monitor and pressing buy or sell.
  4. Then, EACH DAY, redo your bias and evaluate your plan regardless of your time-frame for trading.  This may happen at any point in a day, and usually once a day for swings.  Sometimes it happens multiple times a day if you are day-trading futures for example.  Plans are not something you want to change that often, so make sure you are following the rules you initially set in #3’s> #’s 1-5 above.  You can rewrite plans with good reason, however, I will say if you are editing a plan too much mid-trade, it might be a bad trade to keep.  Generally, it is better practice to play a plan out until you are in a flattened position; then, change the plan for the next trade.

So, let’s assume we are interested in the stocks mentioned in late DecemberThe goal of that post was to find the bounce candidates from the market being oversold and possibly ready to reward bottom pickers.

Strong: FOX, AVGO, PG, GLD
Held up in downturn: AMGN, PFE, MSFT, MCD, CRM, PYPL, SBUX, V, VZ
Liked companies that got smoked: BABA, NVDA, BIDU, X, AAPL, BBY
Companies that were bad then and now:  TIF, DVN, WYNN, ATVI, GILD

Looking at the good calls I made: FOX, PG, CRM, SBUX, MCD, PYPL, VZ, AMGN all came from the first two lines.  The smoked companies haven’t exactly made their way back, they were potentials but haven’t shown longable price action yet.  Misses above include WYNN, this stock has been doing well when I expected continued weakness, and then GILD is similarly wrong.  ATVI, TIF, DVN still look too weak, and though stronger in the up action, I still don’t like them and biased short.  GLD flipped bias on me, and its future /GC has retreated down to its 3yr pivot, and looks like it will hook back over it short. It has had a big run.

In my framing of the market I see that indexes are all bouncing off of their yearly pivots. So, I will be looking at the long signals on my map for the week and judging the juice of each.  CELG and NFLX were the stocks I totally missed, but they are look overbought.  So, in a reversal, I may look at these.  But, overall I will be biased long this week above the 3 year pivot (H+L+C)/3.  Below is the stock signaling, and the /ES and /NQ 3y pivot charts.  Not shown is the expected high of the week which is 50-61.8% Fibonacci retracement of the last down move.

LONG: FOX, PG, PYPL, SBUX, AMGN, AVGO, MCD, VZ, CRM;  new: MRK, ORCL, GILD, LW.
SHORT: TIF, DVN, ATVI; new GLD.  If 3yr pivot given up then short: NFLX, CELG, WYNN, X.

 

Next post will look into the Fisher Transform and how I used QA to find the sweet spot for stocks.  Then, I will apply the logic to the 118 stocks on my list.
AAPL FT traded.jpg

Enjoy your trading and the freedom it brings you! ~ B3

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