Hi everyone!
First red week for SPX in 5 weeks and only the second red week in the past 16 weeks. SPX continues to trade within this large rising wedge on the weekly and dips have continued to be bought.
NVDA 0.00%↑ earnings on February 21st (Wednesday) on the same day as the release of FOMC meeting minutes. Expect volatility in the entire market as a result of this ER.
The prevailing trend has unmistakably been a lockout rally, causing those anticipating a dip to remain on the sidelines or be compelled to chase the market at its peak due to FOMO. In recent weeks, I've consistently emphasized the need for caution in long positions. I've highlighted the gradual conditioning of traders to buy every dip, emphasizing that a day would inevitably arrive when this strategy transforms into a potential trap. Take a look at where we are at on that rising wedge, we are very close to a substantial pullback.
I will keep mentioning this because the risks are currently elevated: Crucial for the upcoming weeks: "Buy the Dip" (BTD) strategy remains viable as long as crucial support levels hold. However, if support crumbles, it triggers the initiation of a short trade, and this short position should be maintained until a resistance level is successfully reclaimed. This underscores the importance of adaptability. For those accustomed to habitually buying every dip, swift pivoting is essential when support levels start to erode. Failing to do so might result in surrendering hard-earned gains by persistently attempting to buy dips amidst a multi-day, multi-support downturn.
Last week I mentioned in our analysis of SPX:
“BTD continues to be in play as long as above 4929. ”
As you can see, it was crystal clear for the week that the move was LONG as a BTD of 4929, and it would likely lead to upside continuation towards the top of the wedge into 5000+.
The red lines drawn above is important zone to watch for the upcoming week. We are looking at a rising wedge that is reaching its apex. My “rug pull” senses are tingling so I suggest extra caution in the weeks ahead.
SPX Analysis:
Key Levels: 4929 & 4999
Bullish Trajectory: Bulls are in control above 4999. If above 4999 we continue up towards 5100.
Bear Trajectory: A break of 4999 can lead to a retest of recent lows around 4929. A breakdown of 4929 leads to a larger sell towards 4906, 4866, 4842. In the event of a flush below this level I will send an additional newsletter with new levels. Keep an eye on this large rising wedge structure to be aware if we are still consolidating inside it or if we are breaking down.
Summary:
BTD continues to be in play as long as above 4999. A fail of 4999 is the first warning to bulls that this rising wedge is about to break down and can see the start of a 250+ point flush.
IWM 0.00%↑
Breakout retest held and bounce back over 193.30 taking us back to 203. 203 level is above, if we can break past that we can target the recent highs and attempt a breakout to 212-216. IWM has alot of catching up to do vs SPY & QQQ so this one can move independently to SPY/QQQ even if the others are pulling back.
QQQ 0.00%↑
QQQ remains in active breakout with 408 continuing to be the pivot spot of control. Above 408 there is plenty of upside room into 472 (measured move).
We can use the 420 level as a guide, if we fall below it, we could see a retest of 411. If 420 holds we can see continuation into 436 (again) and 449.
There is no bear case here unless 408.71 falls which would be a short to 394 and 387
TRADE ALERTS:
For those of you not in the Discord (www.jr28trading.com) I highly encourage it as we cover a lot of the setups given here but we also alert LIVE trade ENTRIES and EXITS.
On the subscriber only newsletter:
We covered amazing setups and gave clear LONG or SHORT recommendations on each ticker.
We had some fantastic wins this week on NFLX 0.00%↑ & TSLA 0.00%↑, both posted on the newsletter + the discord.
Some example trades this week:
TSLA $200C FEB 23 @ 1.22 -> 4.80 NFLX $600C MAR 1 @ 2.05 -> 11.65 TSLA $200C MAR 1 @ 2.25 -> 6.83 NFLX $600C FEB 23 @ 2.30 -> 8
Sentiment Check
Here is the economic calendar for next week:
A separate newsletter will be sent tomorrow with the setups I am watching for next week to paid subscribers.
Have a wonderful weekend!
Wishing you a successful and profitable trading week ahead!
Best regards,
Jovan