Good morning
What a week we had as markets sold off for most of the week ending it with an ominous closing in the Dow down six hundred and sixty-six points on Friday.
What does it mean? Is the bull market over? Is the strong economy going to cause a recession? Is the Fed going to be overly aggressive in raising rates and crush the economy? Is the Fed behind the curve on inflation? When and where will this end? Will the markets go down 10? 15? 20? 50 percent?
These are all good questions and the reality is nobody knows 100 percent of the answers. All we can do is speculate and look for signals from the price action and volume. We can watch our favorite indicators like moving averages, RSI, Stochastic, bollinger bands, fib retracements levels Etc... there are hundreds of indicators out there. None of them will be able to let you know in advance with 100 percent certainty what the turning point will be or how long and deep this correction could last. When and if real fear takes hold, people tend to overreact. Our job is not to overreact but plan and strategize on how we are going to navigate in any market climate.
Last week I mentioned how many sectors looked strong and how many great looking setups there were heading into a big week of earnings. Earnings were not terrible, even though you would have thought so if you just looked at the market price action. Equities ran into these earnings and it appears that the good news was already baked into the price of the of the stock for many of the companies that have reported. All those great looking setups and strong sectors are now being tested.
We have another big week of earnings ahead with a broad array of industries represented. There are some big names like TWTR, NVDA, BMY, TSLA, GILD, ATVI, DIS just to name a few that stand out for me. This week the markets and sectors are looking vulnerable and we could see some follow through of last weeks sell off. We could also see some sort of bounce as things get overdone in the short term and some value players start taking advantage of discounted prices of their favorite equities.
It is kind of funny how people will talk about wanting a pullback to buy and when one finally comes they lack the conviction to pull the trigger out of fear that it's not a deep enough pullback. If you have a plan and have identified stocks with support levels that appeal to you, and you are willing to be patient. Dips in the market at times like this that give you the opportunity to start scaling into those long- term hold and swing positions you have been wanting. You must trust your plan and take the appropriate action. By scaling in you give yourself some leeway just in case things get worse before they get better. Don't go all in, always keep some powder dry so you have the resources to take advantage of even better opportunities if markets get really oversold. I have been telling the Pro members @ Alpha Wolf Trading that we needed a good correction. Ultimately it provides the fuel for us to move higher. Try to see past all the noise and focus on building your plans. I do not know where this will end or how long it will last but I do know that I am excited for the opportunities that lie ahead. With both short term and long term plays on my radar.
The increased volatility will also present opportunities for day traders with short term scalps. Keep an eye on TVIX, UVXY, TZA, LABD, XIV, SPXS, SPXU for short term trading opportunities. Do not chase them and play them size appropriate.
5 Stocks to watch from this weeks Pro video of stocks to watch for trading and investing
More of a long term hold play looking for a pull back to potential price support to add to an existing long term hold position could have a catalyst this week see below
Another long term hold consideration Approaching 200 day as potential support could take a small starter there looking to build out a position at next area of potential price support if it cracks the 200 day like maybe the 150 area
Potential day trade or higher risk short term swing> aerospace defense event in the upcoming week see below. Could get some news and is in an area for potential price support bounce held up well in a week tape on Friday
More of a day trade opp on a trend line break with volume another name that held up well in a weak tape Very thin low floater do not chase
Full disclosure I have this one from a lower entry lotto swing position. It had a little bounce on Friday but was unable to hold. Showing signs of life needs a good press release to bust loose, a bad press release and it will get crushed Very thin and highly speculative look for volume and do not chase.
Get a full list of stocks to watch, my sector observations and upcoming events in this weeks video as a Pro member of Alpha Wolf Trading
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"Notable earnings reports: Arconic (NYSE:ARNC), Skyworks Solutions (NASDAQ:SWKS) and Cirrus Logic (NASDAQ:CRUS) on Feb. 5; Chipotle (NYSE:CMG), Gilead Sciences (NASDAQ:GILD), Disney, General Motors (NYSE:GM) on Feb. 6; Tesla, Yelp (NYSE:YELP), Michael Kors (NYSE:KORS), Take-Two Interactive (NASDAQ:TTWO), Softbank (OTCPK:SFTBY), Zynga (ZYNGA) and Hasbro (NASDAQ:HAS) on Feb.7; Nvidia (NASDAQ:NVDA), Twitter, Activision Blizzard (NASDAQ:ATVI), Pandora (NYSE:P), FireEye (NASDAQ:FEYE), Viacom (NASDAQ:VIAB) and CVS Health (NYSE:CVS) on Feb. 8; CBOE Holdings (NYSE:COE), ImmunoGen (NASDAQ:IMGN) and PG&E (NYSE:PCG) on Feb. 9. See Seeking Alpha's Earnings Calendar for the complete list.
Banking reset: Investors may be hearing a lot more about "deposit beta" next week as analysts try to sort out how banks will adjust their deposit rates to multiple Fed hikes this year and higher Treasury yields. Deposit beta is a wildcard for smaller banks and regional banks, just as it is for the big names such as JPMorgan (NYSE:JPM), U.S. Bancorp (NYSE:USB), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).
**Super Bowl: **Big players in the advertising mix at the big game include Toyota (NYSE:TM) with three spots, Anheuser-Busch InBev (NYSE:BUD) also with three spots and PepsiCo (NYSE:PEP) with two commercials and the halftime show sponsorship. Wendy's (NYSE:WEN) is going straight at McDonald's (NYSE:MCD) with a 30-second fresh vs. flash frozen ad. However, the company with the most to gain out of the most-watched TV event of the year might be Comcast (NASDAQ:CMCSA). In a nice twist of synergy, NBC can effortlessly build excitement for the Winter Olympics that start in South Korea on Feb. 9 across multiple NBC channels. As far as betting, William Hill (OTCPK:WIMHF, OTCPK:WIMHY) and some other sports books were unbalanced at the time of publication due to the large amount of money being bet on the Philadelphia Eagles.
SpaceX: The Falcon Heavy rocket from SpaceX (Private:SPACE) is due to blast off for the first time on Feb. 6 (opening launch window) with engines capable of 5M pounds of thrust and a potential cargo load of 140K pounds. The rocket is considered the most powerful since the Apollo program's Saturn V. The Verge points out that a succesful launch opens up all kinds of possibilities for space exploration in tandem with NASA. While a SpaceX IPO is still considered off in the distance, a smooth ride next week from the Falcon Heavy is a step in the right direction.
**IPOs expected to price: **TFI Tab Food Investments (Pending:TFIG) on Feb. 6; Quintanta Energy Services (Pending:QES), Huami (Pending:HMI) and Cactus (Pending:WHD) on Feb. 7; Cardlyrics (Pending:CDLX), Ipsco Tublars (Pending:IPSC) and Modus G1 (Pending:MOTS) on Feb. 8.
**IPO/secondary share lockup period expirations: **China Internet Nationwide Financial (NASDAQ:CIFS) and Zealand Pharma (NASDAQ:ZEAL) on Feb. 5; YogaWorks (YOGA9 and Ranger Energy Services (NYSE:RNGR) on Feb. 7; Erytech Pharma (NASDAQ:ERYP).
Investor day: Dunkin' Brands (NASDAQ:DNKN) on Feb. 8.
**Cowen Aerospace/Defense and Industrials Conference: **A huge spotlight from the defense industry falls on New York City on Feb. 7-9 for this key investor conference. Presenting companies include Raytheon (NYSE:RTN), Boeing (NYSE:BA), Cubic (NYSE:CUB), Northrop Grumman (NYSE:NOC), Lockheed Martin (NYSE:LMT), Jacobs (NYSE:JEC), Spirit (NYSE:SPR), Johnson Controls (NYSE:JCI), KEYW (NASDAQ:KEYW) and Leidos (NYSE:LDOS).
Crypto: That escalated quickly. Crypto traders will be tempted to catch the falling knife this week as regulatory concerns continue to shake out confidence in the burgeoning market. The impact of Facebook's (NASDAQ:FB) broad ban on crypto-currency advertising is another wildcard to consider. 7-day crypto scorecard: Bitcoin -20%, Ripple -25%, Ethereum -12%, Bitcoin Cash -24%, Litecoin -22%, Cardano -34%, NEM -34%, NEO -11%, TRON -38%, Stellar -33% and IOTA -22%.
FDA watch: Acorda Therapeutics (NASDAQ:ACOR) is expecting to hear from the FDA if the resubmitted Inrija NDA for Parkinson’s has been accepted for review. Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ), AstraZeneca (NYSE:AZN) and Merck (NYSE:MRK) are all in the spotlight at the American Society of Clinical Oncology Genitourinary Cancers Symposium from Feb. 7-9. Abstracts could be issued prior to the conference.
**M&A watch: **Monsanto (NYSE:MON) and Bayer (OTCPK:BAYRY) face a deadline of Feb. 5 to submit remedies to the European Union. The acquisition of Buffalo Wild Wings (NASDAQ:BWLD) by Roark Capital is expected to close on Feb. 5. The go-shop period on the buyout of Blackhawk Network (NASDAQ:HAWK) expires on Feb. 9. Expect some sell-side handicapping on the potential for a CBS (NYSE:CBS) merger with Viacom (VIAB).
Casino rush: Rising employment could mean a pickup in casino traffic to the nation's gambling mecca. "The Las Vegas economy is on a tear and the recent tax reform will only help," notes Union Gaming's John DeCree. The analyst points to investments in the new Raiders NFL stadium, the Las Vegas Convention Center, Resorts World Las Vegas and Wynn Paradise Park. The positive Vegas outlook could lift Caesars Entertainment (NASDAQ:CZR), MGM Resorts (NYSE:MGM), Boyd Gaming (NYSE:BYD), Wynn Resorts (NASDAQ:WYNN) and Red Rock Resorts (NYSE:RRR).
Sales/business updates: Fastenal (NASDAQ:FAST) on Feb. 6; Costco (NASDAQ:COST) and Zumiez (NASDAQ:ZUMZ) on Feb. 7; L Brands (NYSE:LB), Plug Power (NASDAQ:PLUG), Buckle (NYSE:BKE) and Franklin Resources (NYSE:BEN) on Feb. 8; TD Ameritrade (NASDAQ:AMTD) on Feb. 9.
Extraordinary shareholder meetings: Helios and Matheson Analytics (NASDAQ:HMNY) on Feb. 5; Midland States Bancorp (NASDAQ:MSBI) on Feb. 6; Barracuda Networks (NYSE:CUDA) and (NASDAQ:LSBK) on Feb. 7; WesBanco (NASDAQ:WSBC) on Feb. 9.
Barron's mentions: As expected, the plunge in stocks gets a fair amount of attention from the publication, as does the bounce in the VIX (VXX, XIV, UVXY). General Motors (GM) and Spirit Airlines (NASDAQ:SAVE) are also given favorable write-ups that could turn some heads. Writer Vito Racanelli isn't a fan of the compensation deal Tesla gave Elon Musk."
Sources: CNBC, EDGAR, Bloomberg and Nasdaq.com. SeekingAlpha.com
