Weekly Raid #49 - "O" boy, its Friday
Happy Friday, We made it through another week.
You know what weekend means, Don’t forget to pay yourself.
News of the day
Today the only thing to watch is the S&P Global Flash PMIs. The composite, services, and manufacturing numbers are all due at 9:45 this morning.
The “Flash” numbers are the ones that typically have the highest market impact because they are fresh numbers. With summer ending I would expect a contraction in both numbers. I think that bad news is good news in this current market regime, so anything bad for the economy could likely cause a rally. That’s a really wild statement to make, I hope the Fed is Happy.
Something not many people talk about is how to find your edge in trading.
There are 3 really basic categories that an edge can fit into:
Systemic edges are more like fundamental investing. These usually ride the coattails of something significantly larger than a short-term pop. Value investing or Index Fund investing are examples of system trades. You are waiting for the entire market to rise or for a company to suddenly be valued at its competitor’s comps for it to make you a profit. The time horizon for these edges typically is months to years. These are often the “Safest” edges because your time horizon keeps you in the market for a long time.
A Chart edge is the simplest edge that exists, it's looking at chart patterns or indicators. These are typically the riskiest edges because many are open for interpretation by the user, these are also the easiest to learn so they are where most traders start. Technical trading has a love/hate relationship with many traders, but it can be an incredibly profitable endeavor once you get the hang of it. For an example look at the Twitter account TraderStewie. He focuses almost solely on chart patterns and bottoming formations and does very well.
Volume-based edges are typically the most accurate but are the most difficult to learn. They operate on the shortest time scale because volume is constantly changing. These methods include the volume profile, market profile, VPA, and tape reading. So basically anything that’s labeled as order flow.
These are all only basic categories and there can be a lot of overlap between them all, for example on the daily you see a chart bottoming out, and you may look for fundamental and volume-related reasons to enter. It doesn't and often isn’t an all-or-nothing proposition for one of these buckets. However, knowing where the overarching strategy fits can help you determine your timeframe and risk management.
It’s a Friday so you know what that means, it’s payday for yourself. Some stocks worth looking at if you don’t already are VOO, VTV, O, SPY, WM, HD, COST, or really any other dividend-paying stable stock.
In terms of trading, first up today in AMZN. It gapped below its 50 day yesterday and I would look for a backfill and defense below the 50 to take it short. As with all shorts, spreads or options are the way to go, they are defined risk and can keep your account safe from getting hammered if the stock does a quick flip.
The other stock I would watch today is NKE. It dropped below its value area low on the year and has earnings coming up. Watch for a pop back in VAL for a potential short into earnings.
As always trade well and Good Luck
As always this is all for educational purposes only. You are solely responsible for your trades as I am for mine. Nothing in here should be construed as financial advice, but only educational content about the markets and my particular trading style.