Introduction:
We’re very excited for the launch of the new Trader Membership. In this video, you can learn about the trading strategy for this new product.
Below we provide our first Pending Setups report, that covers all the assets that we currently screen as having a bullish or bearish divergence, leading to potential short-term trading opportunities.
As we discover new pending setups, we will be posting them throughout the week. We will also provide an Active Setups report weekly, which are the trades that have transitioned from pending to active following a break of an important trendline.
Asset Classes
- Walt Disney Co. (DIS)
- Nvidia Corp (NVDA)
- Moderna Inc (MRNA)
- Netflix Inc (NFLX)
- Walmart Inc. (WMT)
- SPDR S&P 500 ETF Trust (SPY)
- Consumer Discretionary Sector SPDR ETF (XLY)
- Vanguard Value ETF (VTV)
- iShares 20+ Year Treasury Bond ETF (TLT)
- Palladium Futures
Equities
Long: Walt Disney Co. (DIS)
-Bullish divergence setup with price making lower low in May and RSI higher low compared to March 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 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.
-Price has not checked back to its 50-DMA for awhile (close to target 1), which could transpire if this trade plays out over the near term. A reversal back to the 100-DMA would align with target 3.
-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.
Long: Moderna Inc. (MRNA)
-Bullish divergence as price made lower low in July and RSI higher low compared to May levels.
-A close above the trendline starting in January and the 50-DMA would activate a buy signal.
-Targets align with key horizontal resistance, with a move back towards the 200-DMA near our second target.
-MRNA has been trending lower this year, which aligns with Health Care sector underperformance, but the last bullish divergence that occurred in 2022 led to strong gains once price broke trendline.
-Stop loss slightly below YTD lows, also aligning with 2022 low levels.
Short: Netflix Inc (NFLX)
-Bearish momentum divergence with price making higher high in July and RSI making lower high compared to mid-June levels.
-A break of the short-term upwards trendline from May 2023 would provide attractive entry for a short trade.
-Target 1 is a higher probability target as it coincides with the bottom of the price channel. However, targets 2 and 3 would require a breakdown in the bullish structure that has been in place since June.
-Netflix has been in a very strong bullish phase, contained in an upwards price channel. There is still room to test top of price channel, but bearish divergence increases attractiveness of a short trade that could see price revert back to support of price channel.
-Stop loss placed slightly above all-time highs, allowing for a retest before closing the position.
Short: Walmart Inc (WMT)
-Bearish divergence as price made higher high in early July and RSI lower high compared to mid-June levels.
-A close below the upward trendline from March would prompt the short trade.
-Divergence is only a matter of weeks old, consistent with tighter target levels. Targets align with key horizontal support levels, while a sell-off to the 200-DMA would meet with target 2.
-Since March, WMT price action has been positive, but a break of trendline could change the recent bullish structure.
-Stop loss slightly above YTD highs, to allow for some leeway for retest before closing position.
Equity ETFs
Short: SPDR S&P 500 ETF Trust (SPY)
-Bearish momentum divergence with price making higher high in July and RSI making lower high compared to mid-June levels.
-A break below the short-term support line from mid-May would provide a sell-signal.
-Given the divergence is only two weeks old, this trade has closer targets to increase the potential success rate.
-After trading sideways for all of April and May, the S&P 500 recently broke higher, but this negative divergence could lead to weakness, including a checkback to the 50-DMA, which is at target 2.
-Macro Catalyst: With the recent euphoria, any deterioration of hard economic data, potentially starting next week with retail sales and industrial production, could bring back recession concerns, and cause weakness in equities.
Short: Consumer Discretionary Sector SPDR ETF (XLY)
-Higher high hit in the middle of July coincided with lower high on RSI compared to end of June levels, creating a bearish divergence setup.
-Targets align with shorter term divergence and key horizontal levels of support. The 50-DMA and 100-DMA also correspond to targets 2 and 3.
-Like the broad market, the Consumer Discretionary sector was rangebound in April and May before recently surging higher, so short-term consolidation could now be due to digest the recent upswing.
-Macro Catalyst: A reversion in consumer sentiment or consumer related data, potentially retail sales next week, could cause a sell-off in consumer oriented names.
Short: Vanguard Value ETF (VTV)
-Price made higher high last week and RSI lower high compared to mid-June levels, causing bearish divergence.
-A break below the short term trendline from the beginning of June would provide an objective short signal.
-Target 1 aligns with horizontal resistance and both the 50/200-DMAs.
-VTV has momentarily broken above the resistance line starting in December of last year, but a false breakout here amid bearish divergence could see downside continue.
-Macro Catalyst: With VTV allocation 20% weight to Financials, Q2 earnings for banks could be worse than expected given a drop off in loan growth and flight of deposits. Value stocks would also come under pressure with any deteriorating macro data.
Fixed Income ETFs
Long: iShares 20+ Year Treasury Bond ETF (TLT)
-Bullish divergence setup as price made lower low in mid-July and RSI made higher low compared to end of May levels.
-A break above the downtrend line from April, which also is in close proximity to the 50-DMA and 200-DMA, would provide an objective buy signal.
-TLT has been in sideways channel for all of 2023 and this bullish divergence could help ignite some upwards momentum in price.
-Targets 1 and 2 are higher probability while target 3 would need to see price break above the consolidation structure in order to be hit.
-Stop loss placed slightly below the price channel, as technicals would lose a key bullish structure should price fall below it.
-Macro Catalyst: The lower-than-expected CPI and PPI prints could spur a sustained rally in yields, as investors price in a disinflationary backdrop.
Commodities
Long: Palladium
-Bullish divergence as price made lower low and RSI higher low early July compared to end of June levels.
-A buy signal would be triggered if price were to close above the downward short-term trendline that extends back to May.
-Targets along with key horizontal resistance levels, with target 1 consistent with rising back to the 50-DMA. Target 1 is a higher probability target while targets 2 and 3 would need to see a more sustained reversal higher in prices.
-Palladium futures have been in downward price channel but there is potential that this bullish divergence coincided with a bottom in price.
-Macro Catalyst: If recent weakness in the dollar extends, commodities such as palladium would stand to benefit.
We hope you enjoyed the first edition of the Trader Membership with this Pending Setups report! We encourage you to provide any feedback in the comment section below.
As a quick note, given the recent rally in equity markets, there are currently more bearish divergences emerging as momentum has lagged the move higher in prices of late. This is particularly true in Tech. Please note that bearish divergences in that sector are highly correlated, leading to concentrated exposures to the same theme.
Great start, nothing with which I disagree. Wondering if SH might be an option instead of shorting SPY. Also, opinion on SQQQ given bearish feelings on tech; looks to have broken trend, RSI < 30 and getting ready to turn up, and MACD crossing?
Something like the model portfolio for the trader members to keep track the current as well as past trades would be awesome
Hi @Gold Finger – thank you for your question. The goal of the trader membership is to provide members with numerous actionable setups at a time with a focus on a clear trading strategy. Given several setups are posted, this also allows members to pick and choose which setups they like the most to implement themselves. However, we will not be tracking performance of our setups, as we believe we provide clear risk management guidelines through our stop loss and target levels, and it is ultimately up to the member to follow the price action once they are in a trade. Having said that, our “Active Swing Trades” report will be reviewing the price action from once a trade moves from the “Pending Swing Trades” report (like the above) to an active setup. In that sense, we will be providing a performance update through additional price action commentary and follow up on the trades that become active. If a trade stays pending, it will continue to be published in the weekly “Pending Swing Trades” report. I hope that helps.
Any long PUTS as we approach all time highs?
Does anyone know if these are all daily chart layouts?
@TraderBen Yes, they are all daily charts. Thank you
Can a more granular “time to target” be provided within the 3-6 month predicted trade window? (yeah I know but…maybe an option expiration date clue…)
[…] Short SPY (Tgt 1 and 2 Hit) […]
[…] Short SPY (Tgt 1 and 2 Hit) […]