Daily Focus – May 21, 2025

📊 What is the Market Narrative?
Today’s price action on the SPDR S&P 500 ETF Trust (SPY) presented an interesting battle between buyers and sellers, ultimately concluding with resilience from the bulls. Early in the session, the SPY moved below its 5-day simple moving average (SMA), suggesting potential weakness. However, this downward momentum failed to find sustained acceptance, as evidenced by a strong recovery. The day concluded with the formation of a bullish hammer candle, signaling that buyers stepped in aggressively at lower prices, pushing the close back above the 5-day SMA.

Furthermore, today was an “inside day,” meaning its entire price range was contained within yesterday’s range. This, combined with the previous two sessions, forms a three-day balance on the market profile. According to balance rules, the market is poised for a directional move once it breaks out of this established range. Should the SPY break higher, the bulls will likely target the recent all-time highs, aiming for a continuation of the prevailing “melt-up” trend, where price action consistently oscillates between the rapidly ascending 5-day SMA and the upper Bollinger Band. Conversely, a break lower would require clear acceptance below the 5-day SMA and a decisive breach of the current red trendline to signal a shift in sentiment and potential for further downside. The market’s next move out of this three-day balance will be crucial for determining the short-term trajectory

Heading into the session I don’t see a high enough quality setup in a high enough quality stock that has formed a signal candle I think warrants being targeted via a BSLO. It’s a market better suited to a tactical approach ORBs and Intraday Swings. Often the leader of the day is the first one in it’s group/theme to power through HOD with construcive price/volume action. Little details, but they matter. Of course, vice versa for the short-side.

We don’t tell the market what types of setups it provides us.  Rather, we observe, orient and decide what opportunities/setups it provides, then act accordingly using our trading toolbox – Signal Bars, Tactical Longs, ORBs, Tactical Shorts.  This will ebb and flow on a day-to-day basis and week-to-week basis.  Adapting to this is of upmost importance from an identifying setups and trade management perspective.

Here is my daily process:

1. Are we in an ideal Swing Trading environment? This means leading stocks ‘calmly’ tightening along key daily MAs. If yes, look for signal bars to form, which I could target via BLSOs or ORBs Setup.
2. If no, are we short-term extended to the upside? Wait for leading stocks to pull back towards key daily MAs (especially if overbought 20-day MA breadth readings), then tactical short setups or non-correlated groups/themes like commodities are an option.
3. If no, are we short-term extended to the downside? Wait for leading stocks/themes with relative strength to reclaim key daily MAs via Wycoff Phase C Spring (especially if oversold 20/50/200 day MA breadth readings), then tactical long setups to overhead resistance (sell 7/8th LOC, swing 1/8th & possibly 5 Min ORB next day) and/or tactical shorts at key levels and Daily MAs.

🔍 Developing Setups:

• BULLS
  • Gap and go to repair Monday’s Poor High
  • If a deeper bull structure off the support zone with right shoulder off the 5-day SMA
  • Looking for a bullish structure off the 5 SMA or purple algo
• BEARS
  • Looking for small cup to close at green support zone and handle rejection off 5-Day
  • Looking for the main cup to close with support at 20 SMA and handle rejection off 200-day SMA
  • Looking for bearish structure off 5 day SMA
• SCALP RULES ( Two very, very simple principles)
  • Set out the trading framework for the day. So, you take trades only based on the rules you established based on the context for the day. For the morning moves, if the market is kind, it’s looking for continuation structure. Identify the control algos, and the precision algos for the breakouts.
  • NO REVERSALS UNLESS: Head and shoulders or for Cups to close and handles form. The principle behind waiting for cups closing to soak up the sellers before confirmation of going long. If unclear. Wait for break/retest.
    • An advance move is called a ZOMI (Zone of Mutual Interest). A big part of understanding ZOMI is to not call the absolute bottom/top. You want price to minimum move back into algo and to know where the liquidity is that both bears and bulls want to gravitate toward. 5day MA is often a usual suspect. If we lack continuation structure and get a stop hunt – you are prepared. Use engulfing candles as stop hunts at lows for a head of a HS formation.
    • Example below of a great ZOMI trade waiting for the handle off the magenta as resistance R:R yes? It will help you get in position for both the IHS handle and the H&S. Enter puts at green candle off magenta as stop loss target

💥 Earnings / News Movers:

Tomorrow, Wednesday, May 21, 2025, the economic calendar features several reports that will provide further insights into the US economy. The morning begins with the MBA 30-Year Mortgage Rate at 4:00 AM PDT, offering a glimpse into the cost of home financing, which can influence housing market activity.

Later, at 7:30 AM PDT, the Energy Information Administration (EIA) will release its weekly Crude Oil Stocks Change and Gasoline Stocks Change. These reports are crucial for energy market participants, as significant changes in inventory levels can impact crude oil and gasoline prices, with knock-on effects for inflation expectations and consumer spending. Unexpected shifts in these figures can also drive volatility in energy futures (/CL) and related equities.

Throughout the day, Federal Reserve commentary will also be present, with speeches from various Fed officials. While not direct data releases, their remarks will be closely monitored for any nuances regarding the Fed’s economic outlook and potential implications for monetary policy, adding another layer of interest to tomorrow’s trading session.

I will be looking at PANW, BIDU & XPEV pre-market earnings in the morning to see if we have a Gap and Go or Gap and Fade play. I will play SNOW &ARQQ earning butterfly lottos or double calendar plays for Friday.

🎯 Key Groups/Themes & Leading Stocks
These are some of the main groups/themes and what I deem are current leading stocks within them I’m watching for setup opportunities to form in coming sessions.

• Jumia Technologies (JMIA): This e-commerce company in Africa is showing a potential bullish setup on the daily chart. The price action is forming a cup and handle pattern, with the handle bouncing off the 10-day exponential moving average (EMA). A breakout above the handle’s high could signal a continuation of the upward trend.
• Applied Materials (AMAT): Applied Materials operates in the technology sector, specifically within the semiconductor equipment industry. The company provides manufacturing equipment, services, and software for the production of semiconductor chips, displays, and other advanced electronic products. On its daily chart, AMAT appears to be forming a cup and handle pattern, with price action finding support at the 10-day exponential moving average (EMA) within the handle. This bullish continuation pattern suggests that a breakout above the neckline of the handle could lead to further upside, capitalizing on the demand for semiconductor manufacturing solutions.
• Meta Platforms (META): Meta Platforms is a dominant force in the Communication Services sector, primarily through its Interactive Media & Services industry. The company owns and operates widely used social media platforms like Facebook, Instagram, Messenger, and WhatsApp, and is also investing heavily in virtual and augmented reality (Reality Labs). On its daily chart, META is showing a cup and handle formation. The handle appears to be developing with price action consolidating around the 10-day EMA, which is acting as a dynamic support level. A decisive break above the resistance defined by the handle’s high would confirm this bullish pattern and suggest a potential continuation of its upward trajectory.
• Fortinet Inc (FTNT): This cybersecurity company’s daily chart shows a cup and handle pattern forming below resistance. The price action is also finding support at the 10-day EMA. A breakout above the handle’s high and the resistance level could signal a strong continuation move.

📊Additional things to consider tomorrow:
Analyzing the SPY market profile chart over the past three trading days, a clear three-day balance range has formed, indicating a period where market participants have found acceptance and equilibrium within a defined price spectrum. Today’s session, highlighted by the yellow rectangle, was an “inside day,” with its entire price range contained within the previous day’s boundaries, further solidifying this consolidation.

According to market profile balance rules, this prolonged period of equilibrium is building energy, and a decisive break out of this three-day range is expected to lead to a directional move with conviction. If the market breaks higher, the upward auction is anticipated to continue, as liquidity from the balance zone fuels the advance. Conversely, if the market breaks lower, a sustained move to the downside would likely ensue. It is crucial to note that if an initial breakout attempt fails and price re-enters the established three-day balance range, the market often targets the opposite end of that balance, seeking to explore liquidity and find new areas of acceptance. The resolution of this balance will be a key determinant of the SPY’s short-term trajectory.

🧠 Get Your Mind Right

1. With early candles, focus on identifying the algos. Do not force the trade. More candles and chop are great. It builds a structure for a larger move. Let the range spread itself out to reveal more imbalances.
2. If you’re in any trade, protect aggressively early candles, please. Especially after large candles, protect.
3. Who cares where the charts are going? So, if you cannot find a structure that will activate the precision algos, just stay out. Let the market present itself to you where it wants to go. No structure, no trade.  If you end the day with ZERO trades. So be it. What’s the problem with that?
4. Be patient with entries. 3 quality trades a day (Not 3 trades an hour). Be patient with setups.
5. If you lose focus, take a breather or call it a day. If you missed anything, so be it. We miss trades daily. You have to get used to it. Second nature to a trader. The market is open every day. For the rest of your life.
6. You’re a Winner. Act Like it! Be disciplined. Be victorious in your rules and discipline. No silly mistakes.
7. You’re not gonna go wrong if you get a good fill (calls at support & red candles, puts at resistance & green candles) and protect aggressively. Getting a good fill is like starting the 100m race at the 50m line.
8. If we don’t see tapering into a respected horizontal channel, we are still in a larger buying/selling channel. Tapering can be messy, take time and will generally lead to a cup. Wait for handle AND the cup completions. Be patient and find the liquidity zones the sellers/buyers can grab.
9. Focus on isolating and compartmentalizing each trade setup. Use the 30min chart to find context, then identify the microstructure algos and structure for trade entry in the 1min chart. At the back of your mind, always look out for the liquidity wedge of doom (low volume, inside candles & no imbalances). Don’t force trades in the middle of the range. Do NOT overtrade a range you’ve already extracted profits from. When we lack continuation, that’s when the liquidity wedge will most likely control a big part of the action. Just set alerts and come back in power hour if there’s no new structure.
10. The rule of thumb is simple – if it’s not in the strongest algo. You don’t want it. If it’s not in the strongest selling algo, then the selling is “controlled”. by whom? The bulls to build liquidity. So, why short this until more confirmation? Such as a stronger structure or closing inverse cups.