ONE EGG Scan for October 20th

The buyers came out on Friday or at least that what the tape showed? Some of the buying was attributed to short covering and based on the reduction in short interest on the NYSE you could definitely make that argument. Either way the bounce finally got a follow through day and we watch to see how it unfolds to start the week.

If we were day traders Friday would have been a day to want to trade, but gap higher to start the day made it very difficult to buy anything an excessive amount of risk. Managing risk is always the number one priority for our money.

Running the EGG Scans

The results below from Friday was on the upside, but you still have to be aware of the micro trend being on the downside. Because our bias in the trend is lower we have to take the necessary precautions in our selections process.

S&P 500 index (SSO) The broad index posted a positive day on the upside, but still has some work to do to follow through.

Healthcare (RXL) bounced back as well, but still struggling to get positive momentum consistently.

Homebuilders (ITB) solid bounce and move through the $22.90 level would be a breakout on the bottom reversal.

Japanese Yen (YCS) strong day for the dollar brought the downside play on the yen back.

Gold Miners (DUST) selling returns to the sector as gold struggles to maintain the momentum against a key resistance point. watching how this unfolds today.

Big bounce in EWI, EWD, EWK… the Euro zone after some strong selling. Could be an area to watch with the ECB ready to engage in a quantitative easing type move in Europe.

Too much waffling to gain any short term clarity on either side. Watching to see how it starts the week. Do the buyers want to step in and rally or just the traders looking for a quick turn in and out?

Trades hit on intraday reversals we discussed last week that still look good as we start the week:

Small Caps (TNA) the reversal off the intraday low as tradable for those willing to accept the risk. Watch for the ETF to clear the $58.90 mark for a trade higher. That happened on Thursday for the small caps. Test Friday gives a new opportunity to trade up to $65.

Semiconductors (SOXL) nice reversal off the low intraday. $77.40 was the level to clear on the upside to trade the bounce. Hit this on Thursday as well. Need momentum to continue in the sector if it is going to close the gap left on the downside move.

Biotech (IBB) solid bounce back above the 200 DMA and $257.40 is the level to clear to trade the bounce. Hit this on Thursday as well. Looking for move to go to $280.

S&P 500 Index (SPXL) the index bounced off the lows and pushed back towards the 200 DMA and that would make a good target with a $65.85 entry point on the bounce. Hit this level, but no real conviction in the move to this point.

Watch the trade setup opportunities below as well:

Natural Gas (DGAZ) joined the selling commodities as it fell back to the bottom of the range and support. More selling to break lower and the short side trade is worth out attention. UNG broke support, but move back throughout the day. Still looking at the downside short term.$4.50 entry on DGAZ is the trade. Hit on Thursday at the open, but continued to sell lower following that move.

Treasury bonds (TBT) the upside buy was back as yields moved below the 3% mark and the ten-year is flirting with 2% level. Fear continues to drive money into the sector despite the potential risk and low yields. Upside spiked on Wednesday with the fear driving money towards safety. Showing a peak climax on that move and the downside trade set up. $51.85  entry on short trade is set up.

Coffee (JO) back on the list as the move higher pushed the commodity back to a topping flag pattern. A break higher would have been a continuation, but that failed on Friday and the trade to $36.50 could be on. $38.30 short entry.

REITs (IYR) they are completing a bottom reversal and break higher. The sector sold off on fear of higher rates from the Fed, but that has actually been the opposite. Thus, the buyers are back and the upside entry looks attractive at the $71.60-72 mark.

Current EGG:

The bias is still on the downside. Despite the move higher on Friday there was still a lack of conviction in the buying. The downside was technically oversold and that sparked some short covering into the weekend. One day at a time for now and we will look at how the trades setup this week. Some trade opportunities outlined above and we will keep our eye on them as the day unfolds.

IF you added the QID post from last week the stop was hit on the last part at $49.50. Target hit on the post and took a 1/3 off (sold at $51) to lock in some profit. Wednesday took another 1/3 off on the move near $51.50 or higher. (sold $51.50) let the tail run and hit the stop at $49.50. Nice trade for those willing to take the risk of the trade.

No EGG to start Monday as need some clarity on risk of the upside move to start the day.

DRN is attractive from our scans with entry at $60.25.