EB Daily Market Report - Tuesday, April 14, 2020
Special Event
Today is the day for our special "Max Pain" webinar for April. I continue to have internet issues, however, which are completely out of my control. I don't want to waste your time trying to host a webinar that we might not be able to finish (or start, for that matter). Instead, when my internet is stable later today, I plan to record the webinar and then we'll send it out to everyone later this evening, once edited. I apologize for not being able to host it live today, but I believe it's in everyone's best interest while these internet issues continue that I simply record it.
Also, we've had a few members write in in recent days, indicating they do not see charts in the DMR when they open their email. First, make sure that you click on "Show Images" at the top of your email. If that's not the issue, please let us know at "[email protected]". We have made no changes in how the charts are included in emails, so we're doing nothing different on our end. So if you have any issues, please let us know so that we can try to troubleshoot all concerns.
Executive Market Summary
- Futures were significantly higher this morning as earnings season gets underway
- After a strong opening gap, our major indices strengthened and remain higher by roughly 2%-3%
- Johnson & Johnson (JNJ, +4.33%) lowered future guidance, but did beat both revenue and EPS estimates last quarter
- JP Morgan Chase (JPM, -3.57%) gapped higher after missing its EPS estimate by a very wide margin due to increasing its reserve for loan losses by several billion dollars
- Technology stocks (XLK, +3.41%) are leading for a second consecutive day, while consumer stocks are also leading
- Financials (XLF, -0.31%) is the only sector that's lower today, resulting from poor earnings from both JPM and Wells Fargo (WFC, -4.09%) and a 10 year treasury yield ($TNX) that's down slightly
- Crude oil ($WTIC) is down more than 5% to near $21 per barrel
- We have no active trade alerts at this time
Market Outlook
While I'm not completely shocked by anything these days, the rally off yesterday's intraday low has been surprising for a couple reasons. First, the magnitude of the rally has been impressive with the QQQ (ETF that tracks NASDAQ 100) up more than 11 dollars, or close to 6%, in just the past 24 hours. That comes after the QQQ had already tested the Fibonacci 50.0% retracement level. Currently, the QQQ is threatening to close above the 61.8% Fibonacci level:
A second reason for surprise is that we're seeing negative divergences across our major indices right now. The QQQ, despite its breakout, still shows an hourly PPO beneath its previous high:
A negative divergence guarantees us nothing. But it does provide a signal of possible slowing momentum.
Finally, this Friday is options expiration day. As prices continue spiraling higher, there's growing net in-the-money call premium that's available to be wiped out by Friday. A sudden turn to the downside later this week would line the pockets of market makers. I'll be reviewing potential trade candidates during our Max Pain webinar recording later today. The recording should be available for everyone later this evening.
Trading Ideas
Most of the stocks on our AD ChartList are performing extremely well today, including IOVA, one of the stocks provided in yesterday's DMR as a Trading Idea. IOVA is up 15.81% today. EVER, the other stock featured yesterday, is up 13.40% today. IOVA and EVER rank #2 and #4, respectively, on the AD ChartList. This approach to trading does work, although it's made much more difficult if you're trading on emotion. Keep position sizes manageable so that emotions do not become overwhelming. There aren't too many really poor performers today, but I'll focus on the two worst.
AUDC:
Accumulation/distribution has been strong here and red-filled candles have been an anomaly of late. Still, volume is heavy so a reversal this afternoon would help that AD line. 21 has been a very significant area of support in recent months, so the current price down to 21 could represent an accumulation area. Remember, there are no commissions, so buying small positions multiple times to lower your average cost can certainly be considered a solid option.
ATHX:
The AD line on ATHX is very strong and the blue circle highlights many long "tails" to the downside. These tails represent intraday lows, where ATHX has rallied throughout the balance of several days. In other words, intraday weakness has, in the recent past, been a great time to buy ATHX. I must say, however, that this is a small biotech stock and carries unusually high risk. Therefore, I'd only consider trading ATHX if you have a high tolerance for risk. Even then, you won't need a big position size to make money if it rallies.
Lastly, one feature at EarningsBeats.com that we haven't focused on lately has been predicting solid reactions to earnings reports. As earnings season kicks in today, I do want to say that JNJ was looking good into its earnings report and delivered nicely. Another company, Atlassian Corp (TEAM), reports its earnings on Wednesday, according to Zacks.com. TEAM shows a very solid accumulation/distribution line and is also showing excellent relative strength vs. a very strong software group ($DJUSSC). I'd expect to see a nice reaction to TEAM's earnings report.
Happy trading!
Tom