3/27 Daily Market Note: Nasdaq-100 retests the FOMC Breakout Zone and Bounces
Quarter-End Rebalancing Leads to Sector Rotation
Hi Everyone,
With quarter-end rebalancing in motion, we’re seeing more sector rotation begin to partially play out.
Earlier this week on Monday, I wrote a note to our folks here that I believed the Retail sector had been unfairly beaten up, where some of the valuations in my watchlist revisiting 2020 COVID levels.
To me, this just didn’t make sense, and I guided on a few names in that note, along with an idea in our WhatsApp group. Most of these have advanced 2-4% due to sector rotation from our entries.
FIVE Below (FIVE) now sees a nice $10/share rally from our 175 area, seeing that 185 level today.
In terms of trade management for FIVE, I’ll lift Stops on the name. My fair value estimate on this company is about 190-195, which I believe it will see again within a year.
I do want to share conceptually how one would go about managing such winners if one wants to guard P&L more closely.
Set a Trailing Stop Limit Order (Good-Till Cancelled)
Set the percentage/fixed amount that you would want to exit the position if it retraces from today’s level
OR - Set a Limit Sell Order at a specified target price of your choosing.
I’ll do my best to keep trying to finding ideas such as this for our members.
As for the intraday session today- I’ll share the excerpt from our Pre-Market Plan for members on NQ below along with the Daily Chart of the Nasdaq-100 (NQ) for journaling purposes.
I was looking for an upside target of 18560 on NQ in the morning. This ended up being the high of the day, essentially.
If we broke below 18470, it would be much harder for me to be intraday bullish. I found this area to be psychologically important from yesterday’s session (3/26).
We can see from the daily structure today that we had a very violent 2-directional move, first in the morning (down) and then towards the closing bell (up).
We achieved the 18560 upside target in the morning shortly after my morning note, and then the Nasdaq saw a dramatic -150 point plunge.
Beneath 18470 (black line below) for the index was the level where it would be more difficult for me to be bullish. We can see that we stayed beneath this level for much of the day where rallies were often reversed and we tested low of day multiple times, before a mega short squeeze at 330pm occurred.
Overall, passive investors have enjoyed smooth sailing for much of 2024. It’s hard to say what happens for the remainder of the year, but I plan to trade it with my daily levels regardless of what happens.
Tech has had a very strong quarter but it may be time for sector rotation into other areas soon. I will be looking for more opportunities for our Community. Make sure to join us to never miss an update.
In the meantime, I am working on releasing another educational guide for members over the coming 2-3 weeks.
Educational Guides can be found in this folder here (will update there when published): https://larrycheung.substack.com/t/educational-guides
-Larry
Link to DCF Archive: https://larrycheung.substack.com/t/dcf-modeling-fundamental-analysis
Note: These are my opinions based on my own research and my model may or may not aligned to the market’s thinking. I have to repeat this in all my notes as there is an element of the unknown in today’s strange macro environment.
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.