Large Cap Tech Earnings Disappoint (Short Position Active)
Yesterday, we finished with a nice green Bullish candle ahead of Google and Microsoft's earnings. Shortly afer the bell, Google fell about 6% and Microsoft around 2%. That's not catastrophic in any way, but it will be difficult for the markets to continue to rally without their participation. And that was only two out of the five large tech companies that make up about 20% of the S&P. So what could happen today? I'd be looking for an inside candle, Doji like candle bouncing in between 3865ish-3835ish and tomorrow will tell us more the direction of the market. Now, don't get me wrong, this upward trend we have has been improving, with now only 66% of stocks below their 50 day and 34% above the 20 day. But this upward trend is looking more to be like an ABC correction to me. A few weeks ago I posted an idea that we were forming a cup and handle pattern and if you take a closer look, it's somewhat playing out. It's not the most attractive cup and handle, but it's there.
If you think about it, we've had about an 18% downward move since about August, so we were do for some type of correction. These are characteristics of bear markets. And even if we break out above the 50 day, I'm not immediately changing Bullish. Counter Trend Break outs are not ideal. Especially when we still have a declining 50 day.
Overall, tomorrow is going to be more of a critical day after we hear from the other three tech giants. If this cup and handle pattern plays out, I could see some significant downside in the coming weeks. I did enter a short position yesterday. Nothing too aggressive, as I want to see how these next couple days play out. If this decides to roll over, than I'll continue to add to my short position. Position size accordingly, risk manage, be patient and stay disciplined. Happy Trading!
If you think about it, we've had about an 18% downward move since about August, so we were do for some type of correction. These are characteristics of bear markets. And even if we break out above the 50 day, I'm not immediately changing Bullish. Counter Trend Break outs are not ideal. Especially when we still have a declining 50 day.
Overall, tomorrow is going to be more of a critical day after we hear from the other three tech giants. If this cup and handle pattern plays out, I could see some significant downside in the coming weeks. I did enter a short position yesterday. Nothing too aggressive, as I want to see how these next couple days play out. If this decides to roll over, than I'll continue to add to my short position. Position size accordingly, risk manage, be patient and stay disciplined. Happy Trading!