Sunday Setups - 1/26

Happy Sunday,

To make your week more enjoyable, we’ve prepared some Fresh Trade Ideas for you. They go nicely with a freshly squeezed glass of lemonade!

What is the Sunday Setup?

It’s a short review of the market, trades from last week and a detailed overview of trade ideas for this week. Build your trading strategy for the week in the time it takes to finish a glass of lemonade.

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Alright, is that sugar kicking in? Let’s find some edge!

Market Review

Before we dive in to the individual trades that I am looking to take, I want to do a quick review of where the markets stand. Understanding the overall market trend will help guide us with how we approach these trades and position size.

We’re back to new all time highs, at least in the SPX. There was considerable strength Tuesday, after the inauguration, and that continued into the end of the week, where there was a bit of profit taking. SPX pinned at $6100 Friday.

The NDX did not make a new all time high, but followed a similar path to the SPX.

The big tech earnings kicked off last week with NFLX, and they will continue this week, with TSLA, MSFT, & META all after the bell on Wednesday (oh, and don’t forget about AAPL Thursday after the bell).

The Fed and Ka-Powell will also be in the headlines Wednesday, as they release the Fed Funds Rate and FOMC statement.

If that wasn’t enough, we have the PCE Price Index on Friday, which is the Fed’s preferred inflation measure.

This week’s economic calendar alone has the potential for some fireworks - in either direction.

So, how do we play it?

Well, let’s ground ourselves in the prevailing trend. The SPX confirmed a new high, so the pattern of higher highs and higher lows continues. The weekly chart has positively stacked EMAs (8 > 21 > 34), and the daily has reclaimed this structure as well. So, probability lies in favor of the bulls.

While the NDX has not reached a new all time high, the daily and weekly chart structures remain bullish.

Despite going straight up this past week, the bullish structure does not mean we go straight up from here. It’s possible, but I think it’s likely that we get a bit of distribution until more information is released this week.

I am a buyer at the daily 21 EMA on the indices and strong names.

In the near term, if we get a close below the low price on the high bar of the daily chart, I would expect price to trade down to the daily 21 EMA. Looking at the SPX today, if we get a daily close below 6088.74 (the low Friday), I would look for the SPX to retest it’s 21 EMA on the daily.

I would be a buyer at the 21 EMA, looking for continuation to new all time highs.

I would only look for a larger downside move beyond the 21 EMA, if we get a daily close below the 21 EMA on the daily chart and a cross of the 8 EMA below the 21 EMA.

Though, to blindly take longs at these levels (extended from the EMAs on the daily) is risky, so will need to pick our spots.

Given we are right in the middle of earnings season, there are several setups that come with increased risk. Remember, directional plays on earnings can nullify a proven setup.

However, there are a few that look great this week, and we don’t have to worry about earnings, as they release in March.

Ok, here’s what I’m trading this week.

This week’s Trade Ideas

1.) CRWD  Long

Reasoning:

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