Here’s how to spot an intraday bottom. Check out the intraday action on $QQQ, $NVDA, $AMZN, $GOOGL and $AAPL (June 09, 2017)GOOGL QQQ XRE MDY IWM SP-500 DJ-30 DJ-20 QQQ GOOGL AAPL QQQ GOOGL QQQ
I wanted to get out this video intraday here. Right now it is 2:21 on Friday, that is Eastern time, and I just want to share with you how I look at the market during these times. First of all just look at the daily chart here and then we will get into intraday, I want to show you some things. You can see the kind of move that the technology sector has had. We have seen this thing before, by the way, and it has given us a pretty good buying opportunity so we may see that again on Monday. It is Friday afternoon, it is just really not something that I am willing to step into. Though, I will tell you this, by the time the market is closing I may change my mind. The reason I say that is because one thing I learned from Larry Williams, who is a very well known commodities trader, is he said, “A lot of times the trade that you least feel like taking is the best trade.” In other words, when you are seeing something that is kind of scary or makes you really, really hesitate, hey, everybody else is seeing the same thing.
For example: today you see this kind of move on twice average volume. Guys, that is massive selling. We know it is massive selling because the market is down over 2 percent, which tends to be the stuff that make the headlines and it is twice average volume. So the move has already happened; this is what I am going to be getting into ( NASDAQ:QQQ ). The move has already happened so if you are looking at this it is down 2 percent and you are saying, “Oh crap! I have got to sell.” You are probably doing just the wrong thing, because that is what you WANT to do, you want to sell. Well, what you are doing is, you are kind of booking a loss. You can see what is happening here ( NASDAQ:QQQ ). The time to be SELLING is when the move just starts.
Now of course we don’t know when a move is starting how deep it is going to go. That is just the nature of trading, you are always managing risk. You are balancing the risk of missing out on profits by closing a position or not getting into one. Versus the risk of taking big losses by staying in a position, as opposed to getting out of it. So this is always a balance, that is just the way trading is. If it was super easy then I wouldn’t be running Stock and Option Market Mentor I would just be trading on my own and be happily sitting at the beach someplace because trading is so easy. It is not. It is not easy at all.
So, what you want to do is, you have got to stop and go through a mental check list, which is, “What are my are my emotions telling me now? Do I want to be booking a loss here? Do I think this market could go lower?” So you look back at this chart ( NASDAQ:QQQ ), we are just sticking with this. Here we have got multiple days in a row where the Nasdaq pulled back, but it was also in a different situation here. It wasn’t extended like it is here. It wasn’t in an uptrend like it was in here. It was trading sideways, so we had a little sell-off.
So lets look at what has happened, after this has started to move higher. First of all, this little sell-off here lasted a few days but it was shallower then this one was, which was shallower than this one was. So now, we are trading sideways here but look at the relationship of this retaliative to the 200-day average or even the 50-day moving average. You know it was extended but it was also in a flat base here. So as it turns out buying right at the close would have been buying at the bottom, here, extended, pulls back. Buying right at the close would have been a great buying opportunity.
So now this leads us to Friday, now it is 2:27 and I am looking at this, I don’t want to step in yet. Why? Because we have an hour and a half of trading left to go. And sometimes on Fridays a move that is kind of a dramatic move during the day will actually accelerate into the close. But sometimes it will reverse too; and that is when you say, “Okay, I will start taking a small position here committing myself to the long side.” We might as well look at this here ( NASDAQ:QQQ ): You can’t really say this is a convincing bounce, not at all. Look at the volume here, the volume really was spiking up here and all these bars are red, the big bars are red. That shows institutional selling, it is extra selling, very aggressive selling. So we get this move up. Now, to me this looks like the capitulation right here. This capitulation was magically right on the even number, 2:00. So we got a big highest volume bar of the day on a 5-minute chart and this has not fallen to this level since. So this to me is starting to smell a little bit like a bottom.
We will look around at some other things, let me show you other tech stuff. Oh! Before I do, look at this, SPDR KBW Regional Banking ETF ( NYSEARCA:KRE ), that is moving up. MidCaps ( NYSEARCA:MDY ). Moving up, not a great day but compared to the Nasdaq a phenomenal day. SmallCaps ( NYSEARCA:IWM ) doing okay. The S&P ( INDEXSP:.INX ), not surprising that this is not up just because it is heavily weighted in tech because it is a major index. Dow Jones ( INDEXDJX:.DJI ), up a little bit. Transports ( INDEXDJX:DJT ), down a little bit. So basically this is the redheaded stepchild ( NASDAQ:QQQ ) in the market, no offense to redheaded step children. So we are looking at this and this is what I am saying, I am not ready to go long now but we could see a dramatic change within the next half an hour. I will be looking at 2:30, which is coming up pretty quick here. Again, 2:00 big volume spike. We tend to get these programs, these selling or buy programs on hour or the half hour. You never see a buy program or a sell program hit at 3:10 in the afternoon. They are always just straight up or straight down. I don’t know whether this is going to happen here now, it’s 2:30.
So you would look at this and see, is this going to continue to go lower or are we going to get a little rebound? If we get a little rebound then it is just a waiting game. If it goes a little lower then it is just a waiting game too. So what we are really doing is, we are checking to see if this is the bottom (I will zoom out to a 15). Doesn’t this now look even more like this is probably the bottom of the day? So maybe it is time, maybe it is something that we want to start moving into.
Now, this is how I would make this assessment: First of all, not doing anything now. But we see this little move here. So I would set an alert up here, close enough, we will just do it for a day, 5-minutes later. So if this comes up to 140.75, lets just do it that way. If this comes up to 140.75 then I am going to really feel like I have got some short-term confirmation that this is the bottom. And by the way, the difference in a percentage basis is .33, less than one percent. So I would be trading with precision here; I have got the scalpel out. I would look to buy this if this runs up to 140.75. Maybe I wouldn’t buy that, but I would look at some of the other stocks. So we are in the 15-minute time frame here. I will put this in a 15-minute time frame as well. This is how I have these charts setup, these are matching, these are matching, so everything is matching up and down.
If I change this to Apple ( NASDAQ:AAPL ), they both change. So I am seeing the Q’s ( NASDAQ:QQQ ) and I am wondering if it is the bottom. I am going to look at these various, the big cap stocks in the Nasdaq and see, are they bottoming? Well, Google ( NASDAQ:GOOGL ) looks like it just might be doing that, so we track this. Amazon ( NASDAQ:AMZN ), daily chart. By the way, this box that you see, this is surrounding where I what the price to stay, because I have a bear call spread clear up here at the 1040.00 mark, and a bull put spread clear down here at the 940.00 mark. So I have a $100.00 bracket here. Where as long as the stock stays within this box for the next few weeks, I am going to do real well. And if it doesn’t, if it starts moving in an extreme way one way or another then I will have to make an adjustment. But I like my chances. So we are still waiting here.
Then we look at NVIDIA ( NASDAQ:NVDA ). NVIDIA ( NASDAQ:NVDA ), this does not bode well for the rest of the market. Why? It doesn’t bode well because this continues to make new lows. Amazon ( NASDAQ:AMZN ) is a little bit behind the curve. You can see Google ( NASDAQ:GOOGL ), very close to doing that. So we look at the QQQ’s( NASDAQ:QQQ ), printing new lows. As I am looking at this chart I am interested in getting in, but I am not going to get in. And I am not going to get in because I don’t see any indication, I just see no indication that the Q’s ( NASDAQ:QQQ ) are done going down. I see them actually accelerating a bit.
Anyway, I just wanted to get this video out to you and show you the kind of things that I look at. It is not the only way to look at the market during times like this, but it is the way I look at it. We look at the others, Netflix ( NASDAQ:NFLX ) is still going lower. Facebook ( NASDAQ:FB ) is going lower. So again, as I look at this right now, and it is now at 2:35, I still don’t see any buying, so I am not going to be the guy that is going to step in there and buy.