As promised, here’s my follow-up from yesterday.
What’s even better about actually taking the time to break down the technicals, and show you how I do what I do (so you can too)… is when the play I’ve been talking about continues to pan out well.
You’ll see what I mean later.
Remember yesterday I talked about the S&P taking a breather as well as, the individual stocks that align with my overall sector analysis. Well I told you I’d make a video diving deeper into the technicals behind my picks (and why they’re so important). So I did.
Check out the video and the extended explanation below…
To start, let’s talk technicals…
The Double Squeeze
Some of you may be familiar with the concept of the ‘Triple Squeeze.’ This is a term that John Carter has coined. It’s a pretty simple concept.
Any squeeze — an identification of consolidation that is ready for a breakout — on its own, is a valid trade setup. But of course, as directional traders, we’re always looking for a way to identify the most market movement. One way to do this is by comparing various squeezes on stocks, sectors, and indexes, and looking for a confluence in the same arena.
If, for example, the Nasdaq, the technology sector (XLK), and Microsoft all had squeezes across the same time frame, this would be considered a ‘Triple Squeeze.’ This is one of our most powerful setups, but it’s like a rainbow… it only comes around every now and then.
Why is it so great?
Well because, it’s not just one stock in consolidation. It’s the entire index and sector as well, and the breakout is typically pretty massive.
Why is this important?
Recognizing when a major index, sector, or stock is going to move is the best way to make money. Identifying and positioning yourself for breakouts within specific sectors is critical.
Now, in this moment I don’t have any Triple Squeezes. But, I do have Double Squeezes.
A Double Squeeze is when specific sectors, and major stocks within those sectors, are squeezing on the same time frame.
Where are they?
Right now, I have setups across healthcare, energy, financials, consumer discretionary, and communications. Let’s focus on communications and consumer discretionary.
FYI, in other words, once this market is done consolidating… it’s going to move, in a big way (NFLX has actually already started this move.)
(P.S. if you like this video, it’s a part of our Nightly Newsletter here at Simpler. You can get free videos, like this one, sent to your inbox every night. Sign up at the top of our homepage here.)
Now let’s focus on the respective sectors and specific stocks within them.
These are stocks I’m looking at right now. I’ve included pictures of exactly where you can see the technicals on my charts.
The Communications Sector – XLC – 195 Minute Chart
This chart exhibits a beautiful uptrend, and the last few days, it’s been consolidating on the 195-minute chart timeframe. As such, I’ve been on the lookout for stocks within this sector, that are also consolidating. I’m looking for a bullish trending pattern, relative strength, and a matching squeeze. This is a short-term time frame trade, and my target is the Fibonacci extension around $48.
Phoenix Finder – XLC – Daily Chart
Consulting Phoenix, my trend strength based tool, it’s evident that Facebook, Google, Netflix, Viacom, and Fox are standouts within the sector. Think, “he who has the most green boxes wins.”
NFLX – 195-minute Chart
On this NFLX chart, you can see the 195-minute squeeze, along with RAF buy signals that come with the pullback into the level of symmetry at $350. This pullback is a great opportunity for a buy for me, especially since it coincides with the XLC squeeze and it’s own squeeze at symmetry.
Full transparency, I actually took this screenshot yesterday, and NFLX started moving perfectly within the back half of the market day today. It moved exactly as the technicals told me it would (point taken on why technicals are so critical).
How am I trading it?
I hold long XLY, and I’m adding more long XLC to my long-term stock portfolio, as they’ve been the strongest sectors this year thus far. Additionally, I traded GOOGL with a bullish put credit spread, looking for a trade into $1170. As for NFLX, I’ve sold bullish put credit spreads, as well as placed a butterfly to capture the upwards price movement.
Next on my Radar?
The Consumer Discretionary Sector – XLY – 195-minute Chart
This 195-minute chart is showing consolidation as well, and looks primed for the next leg higher.
What will I trade next?
Well, I’ll consult Phoenix but more than likely it’ll be another stab at NKE, SBUX, TJX, or of course, my favorite, AMZN.
As always, I’ll keep you posted! Let me know what you’re trading in the comments below.