Podcast | The Daily Ticker: EP4: Hot Sectors & Bank Earnings

In today's episode of The Daily Ticker podcast we break down trading for the coming week and review some key questions before you allocate capital to fresh ideas.

Has the technology sector reached the peak of it's earnings potential? 

Is there a better place to be looking for higher probability trades? (Yes! We have two sectors you should add to your watchlist)

Is the worst of the financial contagion behind us? And will the banks reporting earnings on Friday beat lowered expectations or is this the start of the heavily touted recession?

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Hello everybody and welcome boy. Do we have a lot to break down? Last week traded into a, I guess we would say a little bit of indecision, but I think something that is really interesting and something that we spend a lot of time on in our community. Is the fact that when you understand reading order flow and tape reading, you tend to see things before they end up hitting the headlines.

And just to start out today we're actually starting to see some headlines of stocks to watch on the healthcare sector, which obviously we've been on top of now for three or four weeks. So more validation that it is yourself that you need to rely on and have a structure for seeing those kinds of things.

And ironically, which is really interesting now seeing some of the headlines that are coming out about healthcare stocks, they are so far beyond the optimal entry that they're not actually good entries right now. They're going to have to reset before we look for a new swing. Trade.

Obviously bullish, obviously solid order flow, obviously strong momentum, but well beyond the optimal entry. We're going to take a look at a couple of those. We have some pretty big economic data coming out next week as well. We're actually going to start out right here with obviously the stock market was closed on Friday.

We did have numbers coming out. The jobs report came out and conversations around maybe one more rate hike by the Fed. But I think more importantly, whether you determined that it came in hot or not, obviously the market liked it. The futures on Friday morning were negative by a pretty decent amount and spiked and held that bid heading into the end of that session, which obviously was very short.

It was just long enough for that number to come out to have the market react to that number and working our way over into the rest of the stuff that's going to be unfolding next week. The banks, oh my gosh, the banks are coming out next week. We got CPI data coming out next week. What's interesting is data coming out Wednesday and Friday, so what kind of price action are we going to have heading into that?

What kind of volume actually are we're going to have? We're actually going to take a look at General Electric as well as a m d two of the stocks that we've been trading a ton of over the last six to eight months. Both of them have a little bit of a bearish tone to them. GE is still clearly bullish from an order flow perspective, but we are starting to see down days on heavier volume, which is not what you want to see.

One thing that's really obvious, and you can see the picture here, one thing that's super obvious, and we work our way over to the last five days of trading and breaking it down to stocks that have reasonable beta as well as the minimum volatility and liquidity that we require for some of the ideas.

Incredibly obvious that money is shifting out of tech. And we're actually going to have a very quick conversation about why we believe that's happening and where that money is moving into. If you haven't been following Google over the last week or so, especially on Friday, my gosh, what is it?

An amazing stock to trade on Friday on that breakout. Congratulations to everybody who is on top of that, but clearly. Obviously right now money is working its way out of tech. Why? We'll talk about that in a second. Working its way into healthcare, energy was still looking for that breakout in crude oil over 82.

A lot of large cap stocks holding that bid. We're going to break those charts down as well. But then obviously consumer defensive, also catching a bid. We're going to take a look at a few stocks over there as well. Pepsi actually at the top of that list has now pushed pause and setting up a really good clean entry meta, continuing to chug higher in that communication services sector along with Google.

Let's start out before we get into earnings on Friday that are coming out and the c p i data that's coming out, and also airlines actually working our way across into industrials, which the industrials right now are on both sides of the market. Where Boeing is back to that breakout level that we've been watching for a while.

Caterpillar is getting absolutely hammered in the other direction. Cruise lines, airlines, Delta's going to be an interesting one to look at. Their earnings have actually been good the last few quarters, and the question now is whether or not the entire market's going to drag that down. Now here's the big thing about technology, and this is really where you got to start to put yourself into the conversation that we had last week where it was the end of the quarter and the all of the recessionary type conversations.

If you were a hedge fund manager, we had a casual conversation around recession, everybody talking about recession, that kind of stuff. If you had good gains on the stocks that you picked on Q1 of 23, would you be selling at the end of q1 or would you be hanging onto those things?

Obviously, we saw the market hold that bid and actually rally at the end of the quarter. But now the question comes in is how much room is left to go with the way that some of these tech stocks, and probably specifically Nvidia let's just put Nvidia at the top of that list and the percentage gains that the stock has had.

And let's just go straight to the beginning of the year. We're talking about a 99% gain somewhere in that area. Let's just say a hundred just to break round it out, a hundred percent gained since January started. So now again, let's put ourselves into a hedge fund equity strategist type of position.

What kind of risk do you need to take with the potential reward for what the stock has already done? It's been an amazing story for 2023. We've been all over it but putting capital to work at these levels with the story that's been out, obviously AI is a monster part of the story. Could you potentially be putting your money someplace else to be looking at bigger gains, or do you believe that the stock has more room to go and specifically this group?

I think if we work our way over into a m d and some of these other leaders, you can see that they are I don't know they're still definitely bullish, but they're not as bullish as they were, so they're like bullish to neutral, and you can get a really good picture here in a m d In the same time that the these tech stocks that have been flying to the upside have now gone sideways for the last three weeks.

It's very obvious that money has rotated into other areas. Now the question is, has this story played out and now the better opportunities are in other sectors, specifically as we're talking about healthcare and energy? Or are they simply pausing really honestly, the big picture right now is you think tech, you think growth.

Growth means that they need to borrow money for the most part to fuel that growth. Even if, as we just talked about, even if the Fed maybe has one more, and I don't think they're going to cut, but let's even just say that they stop, right? Let's even just say maybe one or two. Everybody that you listen to right now and read, even if the Fed slows down, they're going to be talking about a credit crunch.

So the cost of borrowing money versus the availability of borrowing money is going to be a big conversation for the remainder of 2023 and maybe even beyond, which is probably why we're starting to see some more of these quote unquote recessionary sectors catching a little bit of a bid right now.

Specifically healthcare energy is more of a different conversation around the OPEC announcement, and we're starting to see consumer defensive in it. I'll just put-up Pepsi right now because it's probably one of the top ideas heading into Monday. Pausing right at this breakout level, really clean entry.

Decreasing volume up into this level, looking for this to break out. So, there's a lot to unpack. So we're actually going to start out with reading and breaking down sector rotation for not only how things traded on technically Thursday which is pretty neutral, but communication services obviously buoyed by Google, which had just, I don't know.

Yeah, you probably one of the most technically sound breakouts you could possibly have increased volume above average volume closing near the highs lower opening buyers stepped back up and punched it higher. Congratulations to everybody who happened to be on the day trading side of that idea.

But then if we work our way over last week, not the week that just finished the prior week, obviously pretty strong bullish to end the quarters that kind of got into that conversation. We didn't exactly finish Barish last week. We finished neutral. Where is much, much better opportunity on the long side, and one thing that dominated last week as we were doing the stock picks and the game planning from day-to-day, the list of stocks on the bullish side of the ledger probably outnumbered the list of stocks on the bearish side.

Two, even sometimes three to one going into the day were just even doing those scans of stocks near an optimal entry that had good bullish order flow and the tape was still valid, was heavily tilted to the bullish side of things. Coming into next week, obviously today, doing the game planning heading into Monday.

We're even on this at this particular point. We got a bunch of specialty setups where bullish U-turns and bullish snapback trades are setting up for next week as well. We have the healthcare sector that is clearly strong, but also clearly well beyond the optimal entry at this point, we need them to calm down a little bit.

So, it's really going to come down to where we are from an optimal entry, not a question of whether they're obvious, but because we are starting to see a little bit more setups on both sides of the market, which I'm going to break down obviously in today's call. That means that we're probably going to have a little bit more two-sided trading heading into next week.

Obviously with the economic data we have c p i coming out. We also have the Fed Minutes coming out next week. And then we're going to, we're going to do a little bit of a deep dive into the bank earnings next week. You are probably going to see me call in the community a little bit more longs, end shorts as the week progresses.

If you are not comfortable short selling straight out equities, you can obviously buy puts for those same kinds of ideas. Or if you want to on a little bit shorter timeframe, again, just being prepared before the week starts, you could be looking at some of the inverse ETFs, the S d s or the S Q Q. I actually had a couple people talking to me this weekend about trading the inverse Tesla this week.

And we mentioned Tesla last week on the delivery numbers. We're not awesome. The number, the raw number was good, but as again, as soon as they start talking about discounting price and that kind of stuff, you saw Tesla go down for four days in a row and recovered into a bullish U-turn on Friday.

I still do believe that Tesla has some more room to go. I think down to that 160, 163 level is where we're going to end up. You can see there on the reversal volume was actually less than average on that reversal and recovery on Friday. So I think Friday and Tesla was a little bit more short covering.

Then actually buying it is setting up as a bullish U-turn. But again, you got to put the context of the volume in there with the way the price action traded. Again, everything we do New York method, we need to know how much money was spent to create the chart patterns that we're seeing and whether or not they are valid.

So, let's keep working our way over into the metrics for the week. Some interesting things. I want to start down here at the new 20 day high versus new 20 day low. Obviously, we'll run these metrics. We try and keep it running total over the last 60 days to keep it relevant. I don't care where it was six months ago.

I'm trading in this window, this one week to two-month window, and now 1, 2, 3, 4, 5, 6, 7, 8, 9 days in a row where the new highs beat. The new lows. That's pretty interesting. And specifically, 20-day highs versus 20-day lows. It's just break that down a little bit more. It's not and this is important.

It's not just hitting. A 20-day high because you get off of where a 20-day high will get up there and then retreat all the way back down. We actually run the scan in a very specific way where it's 20-day highs also required to close positive and also required to do a minimum of half the normal volume, if not three quarters of the normal volume.

Cause I don't care about a 20-day high that traded on 40% of its normal volume. That doesn't mean anything to me. Again, getting back to the register receipt of the market and seeing how much money was actually spent to create that breakout or breakdown. So, we also want volume in there to coincide with the reading.

Now as we work our way up into the other market internals, the high low difference is still skewed heavy to the bear side. As a matter of fact, barely on the positive side, even with the rally that we had to finish q1. And you can see last week that the advanced decline was heavily skewed towards the bullish side.

Two weeks ago, last week, a little bit neutral where two days, Tuesday and Wednesday was actually negative. So not a lot on the advanced decline line as far as a harbinger of what's to come. So, what does that mean, right? What exactly does that mean and how, what is the game plan? What is the thought process for heading into next week?

And it really comes down to, I am going to be spending a lot of focus early in the week on energy stocks, especially that crude oil breakout at 82. I'm obviously going to be looking for some shorter-term trades in healthcare and not chasing new swing trades, but there's going to be some opportunities. We're actually seeing some healthcare stocks that kind of bottomed out and are lagging a little bit from some of the other ones.

Obviously, Eli, Lilly, u, n h, and j are probably at the top of that list. AbbVie, A B V is one of the ones that we've been, we had that breakout about a week and a half ago where it's still valid. So, we're going to focus on the ones that are showing relative strength, obviously, as we normally do. But, and again, just setting the tone, setting the mindset for next week.

Fully expect to be trading both sides of the market next week. You have to determine how you want to, whether or not that's a hedge for you, where you're going to be short-term shorts to hold some of your long positions. And I just want to break that down a little bit for you as well. We do have a breakdown of some of the bearish stocks that were that kind of got hit over the week and stayed down there.

Some of them actually having some pretty big percentage moves to the short side and specifically solar stocks with a push to the downside. And they held the office so you can actually see are some of these stocks last week had as much as a seven to 10% move on the bear side. So, this is really where you got to do the work to have a little bit of a edge for how you feel about heading into next week.

We don't want to have an opinion, but how do you feel about the bias? So, when you can see the stocks here on the bear side of the market, compared to stocks on the bullish side from Monday's opening price and how they finished and closed throughout the week. They are relatively close. It's not lopsided like it was the prior week.

And then we work our way over into. Where are we set up for breakouts? Where are we set up, where we have room to go? The s and p 500 still stuck. It's stuck right at that. The S p Y specifically, the ETFs still stuck right at that four 10 level. Hasn't been to get, be able to get away from that.

We did have a three-week rally into that number, but now we finished last week as a giant melted candle. Massive indecision opened and closed the week at practically the same spot. Not coincidence that happened at that big level. So we need to now set some parameters that we need separation from four 10, especially above four 10.

If we can pop through four 10, then we're looking at 4 18, 4 20 in the S p Y, and we got a little bit more room to go. How does that translate into trades? Then that means that we can hold those trades a little bit longer, maybe get a little bit more share size on those ideas if the spy finally gets some bullish separation from four 10.

Nasdaq we just talked about, again, a slightly bearish. Melted candle on the weekly charts, and it doesn't have a lot of room to the upside either. We'll see how that ends up unfolding. The Dow is a little bit mixed right now. Industrials on o other than Boeing potentially breaking out of that two 15 level, which it absolutely has not been able to get through.

And FedEx, which actually had a pretty decent week with that announcement, they made midweek most of the larger cap industrial stocks that we're normally watching what we might call the leading se stocks in that group, pulling back and pulling back hard. We spent a lot of time last week talking about actually short selling Caterpillar.

But now Caterpillar actually broke down through that level that we've been watching, which was that two 10 level. And you can see the gap fill is down around 200. And the last place buyers did something significant in caterpillars all the way down around 180, 185. So the industrial sector where for a while, end of 2022, which was one of those bullish markets, bullish.

Bullish pockets of opportunity. That was super obvious and obviously you could throw General Electric in there. It's not as obvious. And again, remember as we work our way up to Power Pyramid, we want to start out with the market. Is the market obvious? And we work our way up to the sectors. And then within those sectors we have industry groups, right?

That's the easiest way to find wherever the bullish tone is right now, this sector is mixed. No other way to put it, absolutely no other way to put it. Some of them are getting hammered, some of them are in trading ranges. So, this is really more way at the top of the power pyramid where you got to be very stock specific.

Caterpillar was a great short last week, and quite frankly a couple of times during the week, Boeing was actually a pretty good, long, intraday. It didn't hold that big move, but you can clearly see that two 15 level, now, this is technically a bullish U-turn going into the day. Boeing, where it traded lower, came back up, closed above the open, closed near the high of the day, but it still hasn't been able to get through that two 15 level.

So, we're breaking this down and going a little bit more into the industrials. Again, it's kind of like a Christmas tree where half of them for last week traded pretty decently. Half of them were heavily bearish. Again, caterpillar at the top of that list. So, we don't have that broad-based, sector specific bullish tone similar to what we did have in technology for the better part of the first three months of the year.

So, what are we doing? We're setting the tone for how we plan to trade next week. We're getting a little bit more specific into industry groups for some of these ideas that have been very bullish. Now. It's interesting as well, obviously the semiconductor. In technology, carried the entire market on its back.

And you could see here, other than Intel, which had that really beautiful breakout and is maintaining that bid, I know John Bates has been all over Intel now, I think even prior to it, I think over here the mid-March, John started calling it out when it rallied and then finally got up to that $30 level and kind of finally punched through the stock is maintaining a light volume pause.

Not the sexiest stock in the world as far as volatility, but it's in play right now and it's producing some easier trades where we're getting follow through from the open into the end of the day. And now Intel, again, from a volume, price action perspective, and again we want to make sure we print out these charts that's about as clean as a light volume pause as you could possibly get after a really nice momentum move to the upside, has some room to go, looks like around that 37, 30, maybe even $40 level.

So, from what the risk is on Intel heading into the next. Level of where sellers did something significant. 38 to 40 area, it's definitely worth a look for next week. A m d a little bit different. We keep talking about this one. And why do I keep coming back to this? It's pretty easy to trade when it's in play.

And when it's in play it is glorious. There's really no other way to put it. But you can actually see now we have mostly melted candles, mostly selling. And if we do the same thing on the weekly chart, it's actually even more of a mess where we have two very clear melted candle weeks followed by a week of selling.

So again, these are the kind of things that you need to recognize in the moment. Am I seeing separation from the way that we read the tape that justifies accepting risk on these ideas, which now takes us over into the earnings for next week. And I'm shooting all the way down to the end of the week because that really were things.

Get interesting. Delta Airlines actually coming out on Thursday has had a pretty good run from quarterly perspective of beating, so that's going to be really interesting again, working our way up that list and finding some ideas, a lot of the quote unquote easier order flow that we've had recently.

And I think that pa n w is probably one of the easier ones that met that. You get these earnings plays where they open and they hold that bid, especially for a day or two. If they don't pull back and fill that gap or pull back, even if it's not a gap, that's usually a trade that's very easy to spot and usually very easy to manage.

So, Pa a n W is let me pull up that one. Pa a n w is probably the most recent one that held that and really didn't pull back at all worse, pulled back to breakeven. So, we're going to see if Delta Airlines does the same exact thing next week. Again, a lot of these stocks, R C L has been one of the short sales.

U a l has been a short sale, but you can see that they're coming up. You can't ignore bullish. Gap. Bullish. Gap. Bullish gap. Bullish gap. That is pretty significant. All right, so pretty significant obviously happened down at a level where buyers are not letting it get through, which in this case for Delta is 30.

Earnings coming out Thursday, so you got to be aware of that. But the big earnings, obviously Friday, the big financial contagion that we are, that we're unfolding right now, depending on where you read, depending on where you write watch. Everybody now is talking about that there's two sides to this equation right now.

Is the banking contagion contained or is this simply the start of a much bigger problem where F D I C insurance needs to change all of that kind of stuff? The banks are going to set the tone on Friday. Not only obviously we see United Health there, but we have JP. We have Wells Fargo, we have Citigroup, we have pnc.

Probably one of the most interesting ones there is first Republic who also announced that they're cutting their dividend. Wow. No shock there. So, it's going to be really interesting. So what is the, again, if we were in my office in New York City and we're having this conversation to start Monday morning, and we're thinking about what we're going to do heading into next week what is the mindset?

What is the mindset heading into the week? Is everything screaming bullish and we're just, oh yeah. All we're doing is looking for longs. I think sector specific it is, as far as the market's concerned, no. We have a lot of work to do. A lot of them are still at or near resistance, and those are the ones that have actually rallied, don't have a lot of room to go.

So next week, very sector specific. Probably shorter-term trades in the healthcare stuff. Finally, looking for some of the energy stocks, which have now paused for a good week after that. OPEC News, holding that bid, some of them trading into four day pauses even into inside candles. I'm going to be looking for breakouts.

Exxon Mobil's, not too far from all-time highs. And are we going to get separation here in the in the spy from four 10? That's a lot to unpack, right? We just did it in 20 minutes and set the entire week up for next week, essentially, to give you the cliff notes on that, I'm most likely going to be aggressively trading both sides of the market next week, especially again, the Fed Minutes are coming out.

We have C P I data coming out, and obviously we have the bank earnings at the end of the week. Look for either hedging on the short side against longs, or stuff that is already weak. To be holding those as little bit longer term swings. Okay, so now getting into some of the specifics of what has room to go.

Obviously meta is remaining strong and we just talked about Google and they're resting right near a breakout level. You can see here in the X L C communication services, we know that healthcare, which is now a four week rocket ship, you have to ask yourself now with the expanding candles that a lot of these stocks had last week and expanding volume after four-week rally.

Are we seeing now the headline, which ironically is now an investor's business daily? One of the headlines here, medicals deserve close exam. We've actually been watching them now for at least four weeks. Are they now too far to consider for a new swing trade? And I'm just going to say it. Yes, they are.

Especially if we start to take a look at some of them that have not paused at all. And I know that a few people were trading this last week. Lily. Gosh, 1, 336 to 368 and just over a week. We've had the A B V breakout last week, about a week and a half ago actually that held the breakout.

And you can see it's actually still got another, I don't know, six or $7 to go. And we're starting to see some of the other ones that might not necessarily be quote, momentum plays, but Johnson and Johnson also broke this longer-term trend with some ferocity, so short-term trades in these healthcare stocks, looking for them to pause before we put our new swing trades.

And I guess we can actually throw Merck into that discussion as well. Merck had two amazing days if you're a day trader last week, Monday and Wednesday were just fantastic. Again. I know Brian Carr took advantage of both of those. He kept posting. Into the community as well. But now you can also see here Merck having a hard time getting some separation from these one 12 levels, which has been a level that it just couldn't get through.

So best case scenario in Merck and some of these other healthcare stocks, which ironically, again, are now a headline in Investors' Business Daily for the weekend edition. We need them to pause before we set up some new swing trades. And if you're not familiar with what we're talking about on the crude oil number the 82 level in crude oil futures has been the place where the gap now for four days after the OPEC announcement, after the short squeeze, after the failed breakdown.

That's the level and that's where we're looking at. This thing pops above that. Same way we look at the s and p futures of the NASDAQ futures to trade stocks. We got to be looking at crude oil futures for the entire energy sector. We thought we had some good breakouts in MPC and Oxy and a couple of those.

They're actually pulled back now into what we call snapback setups. That we're going to review heading into today. Okay. So again, just to break down the bigger economic calendar for next week, stuff that matters. Wednesday, c p i, crude oil inventory and Fed Minutes. Fed Minutes are very similar to when the actual fed announcement happens in the sense that the Fed announcement comes out and you get the, the volatility back and forth at two o'clock.

Then 30 minutes later, when the Fed speaker starts to interpret what they mean by what they actually did, you get a whole second wave of buying and selling volatility, the Fed Minutes, if you've never traded through a Fed. Release for lack of a better way of putting it, can be just as volatile as the Fed announcement itself on interest rates.

So, you got to be aware that especially if you're on the day trading side of things, Wednesday at two o'clock Eastern, the Fed Minutes coming out, you can absolutely expect to see some volatility because they're going to give some more clues not only on what they plan to do, but what they are interpreting on the inflation side of things.

So, we got obviously if you're looking at the bigger picture type of thing, inflation interest rates and G D P, those are usually the three biggest thing that they're going to take into consideration. And then obviously on Thursday, jobless claims and P I and then Friday we got some stuff also as well coming out.

But I think Wednesday and Thursday probably the two biggest days of economic data next week to really be on top of. And then obviously earnings. At the end of the week. So boy, there's a lot to unpack, but most importantly, how we are heading into the week from a mindset of where can we get aggressive?

Should we get aggressive, and what does that look like? So, sector specific communication services, healthcare, energy. On the bull side of things, technology is a little bit more neutral. Probably going to be trading both of those back and forth. And then obviously the banking stocks at the end of the week and working our way also over into industrials.

Industrials are also going to be two-sided trading. So, two of the groups that carry the market from last October all the way up to this march. Technology and industrials going to be looking for two-sided trading. Bullish side of the market obviously is going to be healthcare and energy.