With The Nasdaq Stretched, Here's How We're Rotating Into New Merchandise

[Music] [Music] [Music] [Music] all right welcome everyone welcome to swing Trader status update for June 18th 2024 and with me is my good friend Mike Webster one of our good friends is not with us and that's Justin because he's hanging out uh I think out of bar somewhere somewhere in Costa Rica if you're in Costa Rica you know just shout out Justin where are you right all right shout out Justin and Wilson at the same time and in my work good call out all right well we're going to be taking a look at what's uh been happening with swing Trader over the past week and what we're thinking about going forward and Mike where would you like to start yeah let's um just start off with the markets uh why don't we pull up NASDAQ and Market Surge and we could start there let me zoom in a little bit K do all right all right so as we've been talking about for a while now we're you know deep into a power Trend that's something that you know Justin uh Charles Harrison and I you know developed as part of the market school rules and it's basically a time where you want to be more aggressive uh than you'd normally and that will end eventually they always do and it'll end when that green line which is your 21-day moving average crosses down below your 50-day so you can just tell by you know the distance we are above the 21 day that by the time that this ends we're going to see you know have a lot of damage so it's not like we wait until the power trend is over we're always looking at Key items to know when to take the you know your foot off the accelerator or tap on the brakes or even slam on the brakes but for now all is good but we are you know what one of the themes we're going to be talking about today is the fact that we are getting a little hot and things are getting a little heated over the 21 day we'll Circle back to that in a little bit let's take a look at spies because it looks uh spy looks similar just not as stretched as NASDAQ does so it's still very healthy there still you know we're in a in a power Trend and it looks like it just wants to keep going but even in power Trends you will see you know Corrections and and things will just you know they don't go straight up and let's go to the cues which pretty much look the same as as an ndaq just a little bit uh Stronger in some ways and um with the cues once it pulls up for some reason I'm not seeing it yet but there we go um that this is getting also a little bit hot in the distance between um you know where we are and our moving averages is um you know getting stretched and we're going to look at the Webb RSI in a few minutes to uh kind of go over that but I'd like to look at our uh 2003 to 2009 uh precedent that we've been using um and Dominic is there a way that we can pull that one up just let me know when it's up because I can't see it on my end okay perfect so on this chart this is something that Justin built for us before he went on vacation so it hasn't been updated this is as of a few weeks ago the top line is our current market um the orange one is the 03 Market that we're using as a precedent and the 09 is um is the one on the bottom and you can see the O 03 and the 09 are almost identical and then you go up and you look at ours and it looks you know pretty much you know identical with just a few VAR variations one that 8% pullback that we had um just happened you know a little bit uh later in the move than the other two and you can see that that that red line the vertical line there that is where we had our follow through day um and so just putting you know all three of these together it kind of gives us a nice road map of what we're expecting so what does this mean the takeaway is we still think that we've got a lot of more to run if these precedents hold and we will keep using these precedents until they stop until it stops working and right now is you know fully intact but you can see there on the right side of this that things do get a little bit choppy and you do have continued pullbacks and so we are expecting those because that would be the norm based off of these precedents these two precedents plus any bull market I mean Chris do you remember any bull market that just went straight up without coming down uh some have gone straight up but then they really came down exactly right like in the very late 70s on NASDAQ and like 78 or so you had that that runaway Market that just never looked back and then of course the tail end of 1999 you had that where it just kept going up and and it never looked back so with that in mind you don't want to say hey we're just getting too hot and bail on everything what you want to do is kind of rotate when one index is getting a little bit hot and try to move into another one so why don't we toggle over if you don't mind can we toggle over to my trading view Dominic and just let me know when we're there okay all right so this is the uh the cues uh using um a different platform where I have uh my Webb RSI my latest version the the version 5.15 zero in there and and that is different than the original version which was percent based this is ATR based and that's just a way of saying that it's just normalizing for the instrument saying you know um every one ATR which you see over here on the right side that is just a normal movement for any given day and I just measure it in 21 days so when um what we're looking at here this and focus your eyes in on this blue histogram and that is your low versus your 21 day moving average so here is today's action that's our low and this green line that is your 21-day moving average so this histogram is just measuring that distance you how far above in atrs and I always say that The Sweet Spot tends to be about a half a ATR which would be down here up to about 3 atrs and once you get up to 3 atrs that's a bit on the the hot side doesn't mean you're going to fall apart but it just means that's a time to start locking in some gains and I'm going to zoom back out and you can see historically where these tend to uh top out at and just look at the blue histogram there you know right it tops out right around three tops out just before it gets to three same thing over here so now we're at the highest the hottest level that we've had in quite some time so on uh swing Trader today we uh reduced our qld position which is just a double of of the qes and so we reduced it from a full position down to a quarter position not saying that we're negative on the market but just saying we wanted to use that cash lock it in up here uh use that cash for some other uh new stocks as well as maybe some future positions either ETFs or individual stocks and we did the same thing with SMH which is of course the um and I have a position in in both of these um and so this one was also getting hot not as hot as it's gotten historically you can see over here in uh early March I got up uh over four atrs uh the low versus your 21 day and so now you're almost almost up there so it could you know based on its own history it could continue to run a little bit but again we just wanted to lock some profits uh in there as it was getting hot and trying to move move those proceeds into some other stock so one that we uh put on today and this is one that uh Chris mentioned on IBD live this morning and I'm gonna test Chris out Chris who who should watch IBD live it's it starts with an E yeah I'm gonna say everyone everyone okay so you have been watching these okay so um we went ahead and rotated in and we just started off with a quarter position and that's something that we talked about last week uh that were're uh rather than starting off with a half or 3/4s or full position most of the time right now as we're kind of casting a wide net and seeing where the rotation is going that um we're going to be starting off with quarters and then adding to them as they work out and what what's your take on on Goldman Sachs Chris well you know what I like about it is that it had such a great run previously and and kind of an unusually strong run for this um stock at least lately and then a very normal pullback and and then uh you know it came into the um the 50-day got support and today you know broke above the the 21 day and it also closed right at or maybe maybe slightly higher than the this uh the June 12th uh high so it was just good action all around yeah I I totally agree with with all of that and you can see by looking at that Webb RSI on here this one also uh kind of capped out right around 3 atrs this time back here um it did get a little bit hotter than that before it died and now our low isn't even above our 21 days so that means that's what we're trying to do right now is rotate out of the ones that are really hot and into ones that are strong but not super hot we'll see how it it it works out of course we have the um you know the 50-day which isn't far uh below us as a natural stop um and if it gets stronger we'll will increase this from here and I think um at this point why don't we pull up the pie chart to kind of show them where we are from a sector basis and why don't you let me know when that's up okay so you can see that um we've we've moved out of a lot of the ETFs which are in the miscellaneous area so that right now is just our qld and our SMH position we're pretty um Diversified at least on the left side of the chart but on the right side we're getting a bit too heavy in the retail and the apparel space so that is a warning to ourselves that hey look we're going to start looking for things not in that area but that's just what's been what's been working right now besides the chip space and a lot of the chips were just too extended for us to be um putting them back on after the Gap up you know that some of them had on on earnings so with this we're just saying okay we're probably going to avoid uh doing much more with apparel and Retail but there are a lot of other places that we can um uh rotate into an increase and you know one place would be the the energy space software of course and then the banks are starting um to look good we thought the Medicals were going to uh work but they're kind of um you know kind of just playing posum a little bit uh for now so um we're not doing much uh new in that space anything to add on this Chris no I think it's uh really good to to be looking at those sectors and ready to move and noting that you know there's you know rotation uh coming in and taking advantage of that so makes a lot of sense okay perfect so why don't we toggle back to Market Surge and we can look at some other you know changes that we made recently why don't we take a is it live okay so why don't we go ahead and go on to on on something I have a position in and something that we increased and so yesterday was really this is something we've had on for a bit now and we are able to survive yesterday's Mo yesterday's you know a sharp selloff uh by just you know again last week we talked about trying to take less action in the middle of the day and trying to make more of the decisions late in the day um to help us with some of these Wiggles and Wobbles that we were frankly just getting chopped up in because I was you know I was being a little bit on the tight side I like keeping my losses frankly even tighter than what we do on swing Trader but I realize that a lot of you who are watching this and seeing all these alerts there was just a bit overkill for some of you I mean frankly I trade even faster than this and so just trying to dial things back I mean a A good rule that I used back in the 90s was if I bought a stock if I wasn't up on it on the end of the day I would sell it so I got very comfortable with buying something if I wasn't up on it it just meant to me I did something wrong it was either the wrong stock the market was wrong or my timing was wrong or a combination of those so that's how I'm wired but I'm als so where and I'm listening to the feedback and realizing that most people aren't comfortable with that high of a turnover so we're dialing things back what does that mean that means we're going to have more smaller positions to let them wiggle and wobble with still maintaining a solid um uh risk uh level and then the other you know and adding to the ones that are working but also some of our losses are going to be a little bit bigger than what I I'm comfortable with for this particular product but again we want to make sure that this is accessible to everyone so uh with that said we've made this now a full position um here because we were able to withstand yesterday's action we're back above our 21-day which is our green line so our expectation now is for us to go through the highs from the last few uh from last week and if it does that I mean there's always room to make something more than a fullsize position with swing Trader our full-size position is only 10% so in the future you should expect bigger than full-size positions in mainly ETFs so let's pull up uh qld for example that was one that we reduced today which is just the double of the cues what we're hoping for is for this e pause and go sideways and then give us a new entry or more ideally at some point have a little bit of a ShakeOut in an upside reversal at that point we would increase it you know probably back up to a full position and then I really would like to get this up to like a a a full plus a quarter full plus a half same thing with the SMH if we get that opportunity but we're just going to go ahead and manage these positions um you know selling some when they're up and then adding to them back when we get an upside reversal um booking uh was another one that we were looking at and that we increased today and um we were looking at uh let's pull up HLT Hilton because that was one that we uh we were thinking about uh putting on as a fresh position as a 2.5% position but really yesterday was your ideal time to buy that as it was clearing the highs from the last couple days so it rather than putting the new position on there was a little bit out of position for a swing trade it would be fine for a position trade meaning position position trading is kind of your Orthodox um the way that leaderboard does and they do a great job of more of a seven or an 8% is your typical Max loss there so let's go over to booking and so what we decided to do is just increase our existing position there because it was breaking out um yesterday and we had already had it on and now it looks like it's a magnet for 4,000 once it gets if it can get above 4,000 it should go um you know a lot further once it gets through a round number we might even increase it uh more than that but that's just something to expect with with swing Trader product that we'll be manage managing these positions you're going to see a lot more of the the quarter size positions on as we're just getting um seeing which ones get tractions the quarter size positions that work um will be increasing like let's go back to the Goldman on here that we were looking at earlier so this one yeah if it if it moves higher tomorrow we might increase it up to a 5% position but at the same time what we'll be doing is looking at if that that same group let's take a look at JP Morgan um and we'll say okay does JP Morgan make more sense than increasing Goldman Sachs let's also look at Morgan Stanley and Bank of America and these are the decisions that we'll be making you want to be making these same decisions maybe you don't even want to go rotate into this space there's nothing wrong with that and yeah let's look at Bank of America and looking at all of these I think as it stands right now that Goldman makes the most sense to to add to and then maybe a second secondary would be Bank of America so that's just how you should be looking at things whenever you buy a stock play through the entire group and just decide which one is your best one sometimes like if it's a Home Building Group you have a lot to choose from or you just go with the ETF um what are your thoughts on on that Chris about ETFs versus individual yeah well quite honestly what I found is if you're not in the the leader it often makes more sense to go with a leveraged ETF and you'll um uh and and that way because most most stocks do not beat triple ETFs and you really have to have a a big winner so like for example uh like xbi versus labu or something like that yeah or or let's say you you missed Nvidia but you want to be in um you know in the chip space so you could always try sockle although this one is very yeah I do have a position in in that one I did reduce it some today but yeah it is very volatile but I I completely agree with you you know on that that the the doubles and the triples um while they have negatives uh associated with them if you're holding them for long periods of time and that's a topic for another day but it's just rather minor but it's not something you want to hold for years uh the doubles or triples and inverse or um just the normal Direction but yeah it's a great play way because you get the diversification but you also get the extra juice with using the double or triple which is what we did with the qld instead of the q's we um pull up spy if you don't mind we'd removed spy uh a little while ago hoping to get into um SSO which was the uh is a double of spy and it just didn't give us that entry point uh the ideal entry point so that's the risk sometimes when you remove something um like what we were doing with qld uh and SMH today not removing it but reducing it that you run the risk that they just keep going up without you and I think that that's a strong possibility but also if you're swing trading versus doing Orthodox trading you do need to lock in gains when things are are stretched and I'm going to just toggle back to trading view for a moment if that's okay Dominic because I just wanted to show one other thing with the um let's see tell me when you can see it we see it okay so the other part of this web RSI is not just the um the blue line which is your your low versus your 21 day it's this orange line on here and the orange line is your High versus your 10day simple moving average and that's something that um I started using back in 1998 and and just found that it was very helpful of when you're swing trading of locking in when that um extension gets uh the you know back then I would used 15% but I've really gotten away from from percentages and uh switched more to this ATR because then it it makes it uh specific to the uh stock or the instrument you're looking at and so when this orange line again that is your High versus your 10day gets to an extreme level around three atrs that's another time to start locking in some gains so you can see this Orange Line there spiked above yesterday also spiked above it or right uh near it back in early January um spiked above it uh in early um November so when those spikes happen they tend to just kind of come down um and kind of you know come back into a normal range which would mean you either go sideways which allows that moving average to catch up or you pull back in um let's do the same thing let's just look at SMH same thing here this is now at uh the High versus the 10day is now at its highest point um since back here in early March and you can see in early March that's when Nvidia which we both have a position in um had peaked out right there at and that was pretty high up almost six atrs back above when it was sold into and it just needed to digest so again that's what how we're managing um these and and so when you see us starting to trim and in um and I'm done with that Dominic you can remove that um that when uh when you see us taking things off and it doesn't make any sense oh why are they reducing qld or SMH up here that's why we're doing it and just really to give us dry powder to spread out into other names and that's all I had for today unless there's something I forgot or anything you want to add there Chris otherwise known as what is your name I hear someone calls me BB someone calls you bb that's me so I am a huge BB King fan I've always been and luckily I was able to see him a number of times in fact even one time front row Center I could have touched his foot if I wanted to and I regret not doing that um but uh anyway so I hold him up here and I always wanted a big brother I have a big sister I don't have a big brother and you're my big brother and you're a big brother to pretty much all of us at IBD um that's how people look at you and you're also Chief content officer really chief of everything so we are calling you instead of BB King BB Chief I hope you're okay with that yes I'll you're okay with that okay all right because for those who don't know I've been trying to get a nickname to stick with this man otherwise known as BBE uh for years and nothing's worked we've tried some other ones that I won't bring up and they haven't stuck so um that's all I've got for you bb uh do you have anything to close us out with uh well just hope that um the next time I see you I don't act like a big brother as some big brothers can act you're GNA be like like McFly McFly oh well great well my connection is starting to get bad so it's probably a sign from someone that it's time to wrap things up and Justin will be back with us next week hopefully unless he decides to stay in Costa Rica which I would not blame him if he does all right well this is really good and uh I gotta say um I'm really liking your RSI indicator more and more so oh thank you I I appreciate it I appreciate that that was a fun one and one day just so people know this isn't something we're going to keep on outside Services as soon as we can get it integrated into Market Serv will be doing that as well as a bunch of other things that uh that that we're working on that uh we we can't wait to share with everyone but we didn't want to keep it under wraps while we're building it so um that's why we toggle over to outside Services sometimes all right well thanks everyone and we'll see you next week

Channel: Investor's Business Daily

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Id: KNeNkdDKD6g

Length: 26min 32sec (1592 seconds)

Published: Tue Jun 18 2024