If you missed it, we provided an introductory video that summarizes the Trader Membership and its strategy.
We have one new setup this week.
New Setup
- Health Care Select SPDR ETF (XLV)
Asset Classes
- Merck & Co. Inc. (MRK): Pending (Potential to become active today Aug. 8)
- Walt Disney Co. (DIS): Pending
- Nvidia Corp (NVDA): Pending
- Walmart Inc. (WMT): Pending
- Salesforce Inc. (CRM): Pending → Active
- Apple Inc. (AAPL): Pending → Active
- Health Sector Select SPDR ETF (XLV): New Setup
- iShares Russell 2000 (IWM): Pending → Active
- Real Estate Sector SPDR Fund (XLRE): Pending → Active
- SPDR S&P 500 ETF Trust (SPY): Pending→ Active
- Bitcoin: Pending
Equities
Long: Merck & Co. Inc. (MRK)
-Bullish divergence setup with price making lower low and RSI making higher low at the beginning of August compared to mid-July levels.
-A break above the short-term downward trendline that starts in early July would provide a clear buy signal.
-MRK appears to be forming a bullish wedge pattern, on verge of a breakout to the upside.
-Target 1 aligns with the 50-DMA, and would also break above the 200-DMA. Target 2 is at the local top at the end of June and target 3 the year to date high.
-MRK has traded sideways for much of this year, so a rotation back into pharmaceutical health care companies, which tend to be more defensive, could help spur a reversal higher.
-Potential stop loss is placed close to the year to date lows, and would meet the longer-term trendline going back to March of 2022.
Long: Walt Disney Co. (DIS)
-Bullish divergence setup with price making lower low in mid-July and RSI higher low compared to March level.
-The divergence has extended as price consolidates around this level.
-A break above the downward trendline starting in February would provide an objective buy signal, activating a long trade on a close above it.
-The 200-DMA aligns with our first target, while targets 2 and 3 are consistent with key horizontal resistance levels.
-DIS has been a clear laggard in the Communication Services sector with no sustainable rally in 2023 despite the sector gaining over 30% this year, so there is a potential “catch-up” trade if there is a rotation to laggards within the sector.
-The potential stop loss is placed slightly below the YTD low to ensure traders aren’t stopped out of the trade too early if price were to test that level.
Short: Nvidia Corp (NVDA)
-Bearish momentum divergence with price making higher high in July and RSI making lower high compared to early June levels.
-A break of the primary upwards trendline dating back to January would provide an objective sell signal, activating the short trade on a close below it.
-Recently, NVDA broke below its 20-DMA, which is bearish tactically, and is teetering on the trendline.
-Target 1 meets the top of the upside gap level, while target 2 is in the middle of the price gap. Target 3 is a lower probability target as it would most likely be accompanied by a bear market in stocks.
-NVDA is the leader of AI craze, so placing stop loss only slightly above all-time highs will allow traders to get out of the trade quicker should AI optimism refuel.
Short: Walmart Inc (WMT)
-Bearish divergence as price made higher high in August and RSI lower high compared to mid-June levels.
-WMT has moved higher of late, but the bearish divergence has been extending, so this setup remains pending.
-A close below the upward trendline from the end of May would prompt the short trade.
-Targets align with key horizontal support levels, while target 3 would need to see a sustained reversal lower in prices in order for it to be met.
-Since March, WMT price action has been positive, but a break of trendline could change the recent bullish structure.
-Potential stop loss slightly above YTD highs, to allow for some leeway for retest before closing position.
Equity ETFs
New Setup: Short: Health Sector Select SPDR ETF (XLV)
-Bearish divergence setup as price made higher high and RSI lower high in July compared to April levels.
-A break below the trendline extending from the end of May would provide the sell signal.
-The move below that trendline would also see the sector fall beneath the 50 and 200-DMAs.
-Targets align with key horizontal resistance levels, with target 3 needing price to sustain a continued reversal lower in order for it to be met.
-Macro Catalyst: XLV recently bounced off its 50-DMA, but a continued rotation into cyclicals (Financials, Energy, Materials) could come at the expense of Health Care if economic data were to outperform.
-Stop loss is placed at the unfilled gap from December of 2022.
Cryptocurrencies
Short: Bitcoin
-Bitcoin hit higher high in middle of July while RSI made lower high compared to end of June levels, causing a bearish divergence.
-Price fell below 30,000, and is now below the 50-DMA. A break below the trendline that exists from January in addition to horizontal support around ~28,000 will provide an objective sell signal.
-Targets 1 and 2 are tight given the bearish divergence is short at three weeks old, allowing for higher probability of targets being hit. Target 3 would need to see price re-enter a bear market.
-Despite all the bullish rhetoric surrounding potential ETF approvals, bitcoin has been unable to break decisively above 32,000, which is strong resistance.
-Macro Catalyst: A countertrend rally in the DXY could pressure Bitcoin given its negative correlation to the dollar, in addition to an overall risk-off environment if economic data were to come in weaker-than-expected.
-Potential stop loss is placed at horizontal resistance at the high from May 2022.
Update on TLT?