Sunday Setups - 3/23

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.

The bounce we covered last week came through this week, but it was met with some resistance. The S&P found some resistance near $5700, but had a somewhat bullish close Friday.

So, the million dollar question - where do we go from here?

Well, the EMAs are still stacked negatively in the daily charts of both the S&P and the NASDAQ (8 EMA < 21 EMA < 34 EMA). So, the short term trend remains bearish…until price can regain the falling 21 EMAs on the daily charts (in a daily closing basis).

It is possible we continue to sell off, but buyers have definitely stepped into the market, and I think we could see a move higher at least into the 21 EMA ( ~$5750 in the SPX & $20150 in the NDX).

From there, I would need to see 2 daily closes above those levels to be confident in a sustained up move in the indices.

Now that options expiration is out of the way, it could help pave the way for that move. However, this remains a tricky spot.

In other words, the picture is still not super clear.

So, we remain in a market where we need to focus on strong names that have held up well in recent weeks (for longs), and continue to limit our position size.

Ultimately, the longer terms charts (weekly) are starting to show bearish signals. The weekly squeezes have fired short, and the 8 EMA has crossed below the 21 EMA, which is bearish, and could signal the start of a larger bearish trend.

So, we need to be open to the potential for lower prices.

However, it might be too early to make that call. If you look at the decline we saw in July and compare it to the past few weeks, it is similar in size (see 100% extension level in chart above)

So, this could be a spot where a reversal takes place.

Additionally, if you look at the put call ratio, the 10 day simple moving average (purple line in chart below) is still at a level that would suggest higher prices in the indices.

That does not mean we go straight up from here, but there is not great edge is shorting from these levels.

Net - this week will paint a better picture of the trend to come. If we can regain the 21 EMAs, the trend will start to favor the bulls. If we find resistance and roll over, we join the bears.

Probability favors bears, given the signals in the weekly chart. However, a better short entry would be at the Daily 21 EMA, with a clear stop if prices close above that EMA on a daily basis.

There are still some great long setups, like TTWO from last week, but again, this is not the type of market to take max risk - wait for a more clear picture to develop before increasing position size.

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

This week’s Trade Ideas

1.) ICE  Long

Reasoning:

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