How I Narrow Down the Best Trade Ideas
How I use insights from my 15 go-to liquid stocks to identify trading opportunities (you can build your own mega cap list with the same process)
1. Understand the existing technical environment of major index (both cap weighted, equal weighted, and mega cap growth oriented)
$SPDR S&P 500 ETF Trust(SPY)$ - 10-MA below 20-MA, 20-MA rejection, 2-months Down Trend Line
$Invesco S&P 500 Equal Weight ETF(RSP)$ - 10-MA below 20-MA, much weaker than $SPY relative to 20-MA
$Invesco QQQ(QQQ)$ - 10-MA below 20-MA, 20-MA rejection, 2-months Down Trend Line
$Direxion NASDAQ 100 Equal Weighted Index Shares(QQQE)$ - 10-MA below 20-MA, 20-MA rejection, much weaker than $QQQ relative to 20-MA
$Vanguard Mega Cap Growth ETF(MGK)$ - 10-MA below 20-MA, 20-MA rejection, 2-months Down Trend Line
2. 1-Month Relative Strength Sorting to Identify Leaders — ideally focusing on the top 30% of the list. A key nuance is also considering 1-Month % Gains relative to peers for added context.
Index Reference (1-Month RS% / Symbol / 1-Month % Gain)
50% - QQQ (-2.99%)
83% - MGK (-1.9%)
Liquid Leaders
100% - $Palantir Technologies Inc.(PLTR)$ +18.7%
92% - $Microsoft(MSFT)$ +1.93%
92% - $Robinhood(HOOD)$ +21.4%
88% - $Netflix(NFLX)$ +4.04%
83% - $Alphabet(GOOG)$ $Alphabet(GOOGL)$ (-3.03%)
83% - $Strategy(MSTR)$ +19.52%
50% - $Tesla Motors(TSLA)$ +9.44% (included here because of top 5 1-month % gain that's not captured in top 5 RS ranking)
3. Check Individual watch-listed names for RS technicals, where are their price action positioned relative to the indexes highlighted above
PLTR - The only name trading above all MA, including 100-MA. Down trendline is already breached on 9th April. Immediate resistance at previous high of 25 march.
MSFT - Already Reclaim 10 & 20-MA, but rejected 50-MA on latest close. Immediate 50-MA resistance coincide with re-test of previous high from 25 march.
HOOD - Already Reclaim 10 & 20-MA but still remains in lower high. Distance to previous high (similar to $PLTR and $MSFT) is 10% away.
NFLX - Attempted Reclaim of 20-MA with 3 days of volatility contraction. Down trend channel intact with 2 lower highs, and 2 lower lows. 7% away from previous high
GOOGL - Already Reclaim 10 & 20-MA, but 6.8% away from 50-MA on latest close. Weaker 1-M RS relative to $HOOD and $NFLX because $GOOGL was sold straight down since Q4'24 post earnings gap on 4th feb.
MSTR - Trading above all MA, excluding 100-MA. Much stronger than $BTCUSD. Has yet to have a consecutive close below 200-MA since 10th March 2023. Bounced off 200-MA on 5 occasion in past 25 months. Building a base off 200-MA bounce
TSLA - Below all MA. 1-Month % gainer mainly because of high ADR% of the stock (8.8% for 770B Mega Cap!). May be in consolidation off $220 lows (5th week)
4. Track for VCP style setup at less than 3xATR% multiple extension above 50-MA. Anything more, the most optimal entry is already missed imho.
It's pretty clear which names I'll be focusing on from the list moving forward, right?
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