Hi folks,
I thought this would be a great time to talk about the current market environment and what I have on my radar for the upcoming week!
After another historic election the market found strength rallying into new all time highs and admittingly not quite surprising given how strong the 2024 year has been for the markets. Sure, we had a very quick and fierce drawdown phase in July with an equally as fierce recovery effort in August. Again the market was feeling out traders and investors into September but this point in time marked a higher low from the August drawdown. September through October was more on the volatile side although the trend remained higher.
The election results were met with a positive outcome for the market but short term we became frothy from this rally.
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Now into last week Nasdaq ($QQQ) pulled back and closed lower 5 consecutive days. This phenomenon doesn't occur that often especially confined within 1 trading week. This is a very interesting development!
Lets review $QQQ
A $QQQ daily chart to examine this in closer detail!
A key point to on the $QQQ daily chart above is the market basically pulled back straight into the up trend line created from the August "bottom". That very trendline was retested several more times over the past 4 months. Once in September and again in November in both instances the market staged a recovery created a new higher low.
A secondary scenario here would be continued weakness back into November support ($QQQ 485) and then a potential relief rally. I think this scenario is the lesser of the two possibilities.
A bearish scenario would be if November support failed to hold and $QQQ made a lower low followed by a relief rally that makes a lower high.
I suspect that the first scenario plays out and we see a choppy grind higher off of the trend like much like how the market performed in October.
Checking up on $NAMO and $NYMO
Surprising $NAMO and $NYMO haven't breached an oversold condition. This doesn't mean the market still can't bounce short term but the reversal "process" might be a choppy.
$NAMO Chart:
$NYMO Chart:
I suspect we could chop and churn into $NVDA earnings results after the close Wednesday.
What will drive a potential reversal and rally next week?
$NVDA reports after the close on Wednesday. A positive earnings report followed by a positive reaction will surely help the market find some footing to stage a rally higher. Aggressive traders can play a positive earnings reaction with a leveraged ETF such as $NVDL or to cover the semi sector as a whole $SOXL on the leveraged side.
Here is a step by step educational guide on how to trade Power Earnings Gaps!
Stocks in Play for next week
Assuming the market finds some footing and $QQQ makes a solid attempt at a reversal two recent Power Earnings Gaps stock could come back into play!
$UPST Daily
$UPST posted a very strong power earnings gap pulling back with last weeks market weakness. Friday $UPST closed 1.45% higher making it a relative strength leader on the day.
Watch for a breakout of the falling wedge pattern - Targets $74 - $78
$ALAB Daily
This is basically an identical technical setup in comparison to $UPST. A strong power earnings gap that continues to hold PEG support. In this case the stock is also trying to hold its IPU high, trading smartly around that price point.
Watch for a reversal back into $92 - $96 out of the falling wedge.
$TQQQ Daily
Circling back to our $QQQ discussion earlier in this article aggressive traders could look to get long $TQQQ after a potentially positive $NVDA earnings report for a $TQQQ gap fill attempt.
Conservative targets would sit between $77 - $80
Bonus Setups
Use these bonus setups to build your own trading plan, entries, targets and stops!
$RDDT Daily
$BITO Daily
$BX Daily
I hope this State of the Market review will help navigate some potential trading scenarios for the upcoming week ahead! Trade strong, trade smart!
Cheers and happy trading!
