2/20 Daily Market Note: Markets revisit a Key Region ahead of NVDA Earnings
There is a reason for today's volatility.
Note: Today’s Daily Market Note will be in the form of a trading journal where I share my thoughts from an intraday perspective for educational purposes and self-reflection.
There will be more intermediate-term and long-term ideas when the market is back at levels where I see margin of safety.
Dear Folks -
Ahead of NVDA earnings tomorrow (DCF analysis discussed last night), we find ourselves retracing back to the highly contested region for NQ (Nasdaq-100 proxy) during the CPI Data release where I observed a tug of war in the 17550-17650 level.
There were several confluences for today’s volatility I believe:
NVDA mean-reverting towards its longer-term fundamental profile as traders potentially de-risk into earnings - discussed as Scenario 2 in my NVDA DCF Post
Escalating tension in a Taiwan held Island after an incident with China’s Coast Guard, affecting sentiment towards Semiconductors
Revisiting a battleground region where Buyers and Sellers fought on CPI day on February 14th where NQ fought to stay above 17580 at the opening bell.
In our pre-market today, I was watching to see if the NQ (Nasdaq-100) neckline would fail in the first half of the day after testing it for a second time. As shared, Failure of 17550-17580 on NQ was a reasonable signal to me that we would see 173XX/174XX in the foreseeable future.
We saw 174XX today before recovering.
It would have been a gruesome day had we not recovered.
To protect other existing long positions, I targeted a downside cascade in NQ from the pre-market levels to break below < 17550 with an intention to cover beneath the neckline.
I got lucky with a 140 point flush.
After a 200 point selloff in the Nasdaq during Initial Balance (930am-1030am), I naturally started hunting for Low-of-Day or at least a Local Low that could open up an window of opportunity for long intraday scalps.
Around 1045am, I found enough confluence that suggested to me that we may have hit low of day, and I shared this message below to members.
Just a kind reminder that I cannot directly tell folks to Buy this level / Sell that level. What I can do is identify regions where I think reactions may occur and identify ranges where I think the market may visit.
Generally speaking, as discussed in a prior note, I have listed the Parameters of what I look for on an intraday basis on MES/ES to be 6-10 points and MNQ/NQ to be 50-100 points.
As we can see below, NQ/QQQ/Nasdaq-100 undercut my opinion modestly, but for the most part, we defended that level for the majority of the session.
Around the same time I sent the Low of Day message to members, I flipped Long to retarget 50-70 points on MNQ (Micro NQ) and achieved this target within half an hour. By association, I also looked at MES (Micro ES).
I was able to take advantage of Bounce 1.
The selloff that occurred after Bounce 1 was powerful, and I again tried to identify when the next bounce would come.
Ultimately, I had good entries towards the Lows of Bounce 2 but got stopped out for breakeven as that period of time was extremely volatile and my Stops were too tight (I will learn from that).
I was able to benefit from Bounce 1 (it happened quickly, it was one-directional, no chop).
I was not really able to benefit from Bounce 2 (choppy, back & forth, frequent backtests before recovering). I will try to develop better parameters in the future for such choppy conditions and will share my journaling with our private members when I get more advanced.
An intraday approach need not be overly complex. Simply identifying Low of Day (or a local low) on a bearish day like today is enough information to end the day positive for intraday operators if one is disciplined about securing a defined number of points.
Although I was able to end green today, I found this session very challenging from a psychological standpoint. Today’s session was an 8/10 in terms of difficulty, in my opinion.
So if you found today difficult as an intraday operator, you are definitely not alone.
I will continue to learn, get more advanced, and share my best ideas with folks.
Yesterday’s post on NVDA shares my thinking on how things may play out post-earnings and what markets may do afterwards.
Thank you for your support, and have a great evening.
-Larry
P.S. - I will have more long-term ideas when the market’s long-term levels are more suitable.
Disclaimer: My investment community is not investment, financial, or trading advice, but for educational informational purposes only. I am happy to share my personal opinions which I provide as my personal journal. Trading of any kind of securities involves a lot of risk. No guarantee of any profit whatsoever is made. Investors may lose everything they have. Practice extreme caution. No profit is guaranteed whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this publication are NOT registered as securities broker-dealers or investment advisors either with the U.S. SEC, CFTC or with any other securities/regulatory authority. Make sure to consult with a registered investment advisor, broker-dealer, and/or financial advisor.