📊 What is the Market Narrative?
Analyzing the daily chart of the SPY, we are still hovering below the confluence of resistance factors, including the 200-day simple moving average, the upper Bollinger Band on the daily chart, and the 40-week simple moving average. A rejection at this resistance zone would suggest a potential pullback. Subsequent support levels to monitor include the 554.50 area, representing a potential higher low, and the gap fill level around 530. The Federal Open Market Committee (FOMC) meeting this week serves as a significant macroeconomic catalyst that could influence market direction and volatility, potentially validating or negating the current technical outlook.
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:
- 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.
- 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.
- 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
- An overnight gap or opening drive above and test of 200MA and in the strongest teal algo
- Looking for a bullish structure off the 5MA/ 50 SMA
- BEARS
- Looking for a bearish gap lower underneath 5MA/50 SMA
- Looking for the cup to close with handle rejection off 5MA/50 SMA
- Small cup to close off the pink algo rejection and the teal algo break. Handle off 5SMA/50SMA
- 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:
Here’s an overview of the US economic reports scheduled for release tomorrow, May 6, 2025:
The primary focus will be on the American Petroleum Institute (API) Crude Oil Stock Change, due at 1:30 PM. This report provides a weekly snapshot of crude oil inventories and can significantly impact energy markets, influencing oil prices and related equities. A larger-than-expected increase in crude oil stockpiles typically signals weaker demand and can lead to price declines, while a decrease suggests stronger demand and potential price increases. The previous change was an increase of 3.76 million barrels.
Early in the morning, at 5:30 AM, we’ll receive the Balance of Trade figures for March, including Exports and Imports. These reports provide insights into the US’s trade relationships and can reflect the overall health of the economy. The previous Balance of Trade was a deficit of -$122.7B, with Exports at $278.5B and Imports at $401.1B. Any significant deviations from these figures or the consensus forecasts could lead to market adjustments.
The biggest earnings play of the week is Palantir (PLTR). It initially blasted higher before selling off. It will be interesting to see if we get an ORB in any direction tomorrow based on the pre-market action. HIMS beat on both earnings and revenue. We have a few semiconductor stocks reporting tomorrow after the close.
🎯 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.
- IHS Holding (IHS) – We have a VCP consolidation pattern underneath key moving averages and trendline.
- Cybersecurity (BUG) – This is a Strong Theme to focus on. Nice Cup and Handle pattern. Individual stocks to have your watchlist are CYBR, FTNT & CRWD.
- Amer Sports (AS) – Cup and Handle set up. Look for a break/restest after recapturing the trendline and 50 SMA.
- Crypto Stocks. Look at Bitcoin in the Daily Chart below. Potentially preparing to break out above the $100,000 level. Keep HOOD, COIN & MSTR on your Watchlist.
📊Additional things to consider tomorrow:
With the VIX index receding below 25, signaling a decrease in implied volatility, a short-term range-bound strategy on the S&P 500 (SPX) presents an interesting opportunity. Given the upcoming Federal Reserve Press Conference this Wednesday afternoon, it’s prudent to exit this trade prior to the heightened volatility typically associated with such announcements. The proposed strategy is a SPX Double Calendar spread, which strategically benefits from time decay (Theta) and the expectation of stable implied volatility (Vega) in the interim.
The core assumption is that the market will likely remain within a defined range as participants await Jerome Powell’s commentary, thus limiting directional price movements (Delta). The objective is to capture a 7-10% profit on the initial capital outlay, while implementing a stop-loss in the 10-15% range to manage downside risk. This is a speculative trade with limited flexibility for adjustments once initiated, emphasizing the importance of appropriate position sizing to align with one’s risk tolerance. The short timeframe necessitates a proactive approach to profit-taking and loss mitigation.
🧠 Get Your Mind Right
- 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.
- If you’re in any trade, protect aggressively early candles, please. Especially after large candles, protect.
- 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?
- Be patient with entries. 3 quality trades a day (Not 3 trades an hour). Be patient with setups.
- 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.
- You’re a Winner. Act Like it! Be disciplined. Be victorious in your rules and discipline. No silly mistakes.
- 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.
- 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.
- 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.
- 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.
