Well that was sneaky! Even though yesterday started the trading week off with a bang, the price action quickly changed for the worse.Because despite the headline moves, many stocks under the surface got hit very hard (including a few of my portfolio names). So…

Let me bring you up to speed on the action, and share what adjustments I’m planning to make today.

Big Picture Stock Market Analysis:

At the outset of yesterday’s note, I mentioned how the calendar can often coincide with big stock moves. So between the TSLA drama, and a new North American trade agreement, the last few trading days have been no exception!

And if you look a little closer…

There are further signs of rotation as high-flying growth and momentum stocks got sold-off Monday, while the more inflation-sensitive industrial and material companies really got moving (with oil leading the way!)

Yet from the headline numbers, it was a good start to the week for SPY. So take a look at this daily view to get perspective on the recent pop:

Pretty good, right? Well, I know it’s hard to complain about an up day in the market; but, this one left me wanting a little more.

That’s because shortly after the opening bell, many Nasdaq and small-cap stocks started to reverse. And personally, I was actually a little shocked when I noticed many of my positions down >3% in what was otherwise appeared to be a nice day. Then I looked at the small caps.

So for your reference, the Russell 2000 index is the easiest way to keep track of all these small-cap stocks. And the IWM ETF is a really convenient way to watch these smaller companies.

Here’s the IWM daily chart:

As you can see, Monday provided quite the bearish candle: Sellers quickly grabbed control and threw cold water on any breakouts. And to make matters worse, this is after small caps have been dripping lower for the last couple weeks. Futures are lower this morning too.

So looking ahead, I’ll be curious to see if we get some support soon, or if this is the start of something worse. Because based on the short-term RSI, and the potential for prior resistance to come into play, I’m cautiously optimistic we could see some stability (which may help riskier stocks as a group, catch a bid). So definitely something to watch.

In the meantime though…

I’ll also be keeping an eye on emerging markets, and whether they can continue stabilizing as this new month unfolds. Here’s the updated daily view, where things don’t look quite so dire:

Of course, this group isn’t out of the woods yet. And it’s possible this consolidation we’re seeing in EEM is only a pause before another leg lower. But at some point, bottom pickers will find a little traction.

The other reason I’m a little more interested here is because of the divergence between stocks and bonds. You’ll notice in the chart below that at the start of the year emerging market bonds and stocks were falling in tandem. But recently, things have changed. And dollar-denominated emerging-market debt hasn’t made new lows.

The weekly chart of EMB shows the relatively stability quite well:

On the other hand, FB continues to be my biggest market worry alongside IWM.

More specifically, the daily chart looks ready to test support again any minute now. FB is down to $161 in the premarket and I’ll be watching for a close below $160 as the next warning sign.

And the obvious question is: will support hold? Personally, while I’ve kept my distance from the social media giant for quite some time now, even I’m surprised at how heavy this stock has acted. And anecdotally, I know many friends who have bought this dip without any real exit plan, so a rollover could cause a little panic.

Now even though I’m very curious to see how all this shakes out, I’m still sticking to my trading plan in the interim. And given the turbulence we saw yesterday, you probably aren’t surprised that I have a few more trade alerts for you.

So first up, let me share my latest sell alerts, which triggered yesterday at the close. And then, I’ll reveal where I’m moving this money, with a new buy I’m hoping will have high probability of more upside

Trade Alerts:

Sell TREX (Personal Holdings and Model Portfolio):

My goal is always to find big winners, and then manage risk aggressively. So even though I’m looking for huge trends, I often end up exiting early when things start to go south. And that’s exactly what happened with TREX.

Because after a strong breakout and some initial follow-through, I was hoping TREX would keep trending up. Unfortunately, the stock has really pulled back the last few weeks.

Now sure, this could be the short-term bottom; but based on my trading style, I’m not willing to stick around to find out. Instead, I’m happy to book this modest win and move on.

Here are the details:

  • Entry price: $67.63
  • Target exit price: $74.39 (vs. $74.60 stop)
  • # of shares: 25
  • P&L: $169 (10%)
  • Trading system: S1

But that’s not all…

Sell APPF (Personal Holdings):

The interesting thing about volatile sell-offs is the way everything tends to happen at once. And the thing you’ll notice about APPF is that it looks a lot like TREX. And in fact, if you go back and look at old sell alerts, I think you’ll find this kind of thing is common…

Momentum stocks do sometimes move in convoys. So at the end of the day, you need to be ready! Anything can happen and just when you think you’re in control of your portfolio, the market will throw you a test. In this case, my plan was to exit APPF on a breach of $76.06. So I’m happy to take my money and move on.

  • Entry price: $72.25
  • Target exit price: $76.02
  • P&L: 5.19%
  • Trading system: S1

And here’s one more…

Sell TXRH (Personal Holdings):

To be honest with you, I’m kind of happy to be kicking Texas Roadhouse (TXRH) to the curb here. The stock has been bumping along, and never really moved with conviction. And given the weak weekly technical pattern, I’m not really that inclined to stick around.

Here are the trade details, and the chart (which you can see doesn’t look all that good). On the other hand, if you did want to stalk a dip-buying opportunity this might be worth re-entry if it gets bouncing again.

  • Entry price: $60.92
  • Target exit price: $$67.72 (vs. $68.03 stop loss)
  • P&L: 11.26%
  • Trading system: S1

Now, with these trades in the books and the proceeds from prior sales, I have a little more cash to deploy. Let me show you where I’m putting it.

Buy WHD (Personal Holdings and Model Portfolio):

For one reason or another, I’m getting a lot of younger charts on my stock screens lately. But I’ve had some good trades so far this way, so I’m not going to say no. Plus, unlike most of the less-established stocks I own, today’s example is actually outside the software space. And with the energy and basic materials sector running I’m hoping this low-float ticker at all-time highs can keep coasting…

  • Target entry price: $38.50
  • Stop loss: $38.50 ($6.16 below entry)
  • # of shares: 50
  • Risk: $308 (0.3%)
  • Trading system: S1

So let’s see how that goes. Once I have the cash from these other three sales, I’ll be back at you tomorrow with another buy alert.

Charts To Watch:

BA was one of the strongest stocks yesterday. With industrials acting well, it’s no surprise BA would be leading the charge. The chart look great too. 

ADBE is impressive due to the ongoing and low-volatility nature of the current uptrend. Why not hitch your wagon to another new high? As long as you’re careful about managing risk, these ideas can work well.

NVDA has been an obvious momentum winner the last few years. And it looks like it might be trying to get going again after gapping up to new highs…

TLT is an interesting chart not from a bullish perspective, but because bonds really do look week. While we might see a bounce at support here, I don’t think this is an exciting alternative to stocks right now.

DBO is also worth sharing, while we’re speaking about other asset classes. So I just want to reiterate how strong oil is here. While the Brent chart looks similar, this is an easy way to get exposure via ETF.

STT might be one to watch if the financial sector can get moving again. I’m not a huge dip-buyer, but I think the risk/reward on this one is good with a relatively tight stop 1ATR below recent lows.

Now, I hope these charts are helping you find some potential opportunity. But you don’t have to stop there either. Because I think these carefully curated articles will be of interest too…

Further Reading:

“So onto Q4. Let’s first see how the market reacts to third quarter earnings which will start trickling in next week. On the trade front, NAFTA was settled last night which was a good thing. Now let’s hope for progress on the Chinese talks to give companies some better talking points for their earning’s calls. Giddy-up!” The Final Stretch

“Crude Oil is on the Rise. The advance on Monday confirmed the symmetrical triangle on the daily chart. The target is 78.40. The Factor Tracking Account is long the Nov mini WTI contract.” Crude Oil Is On The Rise

“When I later analysed all this, I found that, in overall terms, trying to be ‘smart’ and cashing in for fear of losing open profits led to a reduction in the overall profits which were achievable. Which is why I am so hot on this aspect when talking to other traders these days”  10 Years On – Lessons Learned 

“”When you know the probabilities of what’s likely to happen next, it keeps you calm through draw downs and losing trades. It also helps with not becoming cocky during the euphoric feeling during the winning streaks.” Can Individual Traders Succeed In Financial Markets?

“Many investors seem to assume the next downturn will be another scorched earth scenario. That is always possible. But if history is any guide, it’s also possible that scenario could be a long time coming.” What If Stocks Don’t Crash?

Alright, that’s it for now! Let’s see how things shake out at the close and I’ll be back at the same time tomorrow with another update for you.

For more commentary and ideas throughout the day, you can find me on StockTwits and Twitter sharing ideas. Any questions or ideas of your own? You can shoot me an email or comment below. Happy trading!