4/24 Earnings Preview: Can Meta pull through to continue the tech rally?
Critical Moment Arriving for Tech. Tesla pulls through. Closing Sell Puts.
Good morning folks - I’m sending out today’s strategy note early today because I want to share observations after the mega counter-trend rally that we’ve seen over the past 48 hours.
In today’s pre-market plan at 8am - while NQ traded 17720ish - I was looking for a modest revisit to overnight highs at 17740 (20+ points higher).
Members know I really dislike chasing at such elevated levels, and my edge is weakest during gap-ups (I know what I’m good at/I know where I’m weaker) - especially after a 600 point move - so I am forced to give extremely conservative targets.
This target was fortunately met, and I accepted that today would be a smaller profit day. Although there are probably more setups later for the session, a 15-20 point move on NQ will do it for me.
Did I miss the nice additional +50 pt pump towards NQ 17790 after 17740? Yes. You bet. Completely missed it. But like I mentioned previously and will periodically repeat, I cannot possibly catch the whole move. Trying to do so will get me into trouble. I caught what I believed to be a reasonable sequence/window, and that’s all my statistics say would be high-probability. Anything beyond this is completely a bonus. After I applied this mindset, I started seeing more and more green on a consistent basis.
I would prefer to see consolidation/regrouping before another leg higher. Otherwise, a sharp/random reversal becomes more and more likely (today’s opening print is an example) before any resolution higher.
When markets move at such a strong velocity in a short period of time, long intraday positioning is much more easily tempted/trapped at the highs.
In other news, I had originally planned to get assigned on Tesla on my 135-140 puts as that was my DCF Bear Case for this name. A direct entry there would have been fantastic. However, the stock skyrocketed after earnings and the Sell Puts have fallen significantly in value. With 30 days left till expiry and 50% of the puts value gone, I’ll close it and look for another opportunity. My upside is naturally less than direct shares, but green is green. I force my mindset to never complain about green. Ever.
Doesn’t matter if we “could have made more”.
Please understand that I have a methodology to find these setups over and over and over again. I have a repeatable system.
I’m trying to help all my members be more profitable and more enduring in markets. For this reason, I have to share thoughts on mindset.
If you have already mastered mindset, then feel free to disregard this.
I’m just urging folks to NOT need to FOMO.
I’ve got more good stuff coming when the market opportunity sets itself up.
Below, we continue a discussion on market structure and this evening’s earnings report with Meta.
Key Observations I’m watching for market structure
On Momentum: QQQ and NQ/MNQ currently have a Relative Strength Index (RSI) of 45, a 15 point jump from oversold level of RSI 30 in just 3 sessions.
The market’s RSI levels have been floating between 45 and 60 since March before the selloff.
While there could be more upside, my statistics show that the easy money has been made. How do I interpret Easy Money on the RSI? When RSI 30 Oversold gets back into the previous momentum range - in this case 45-60. It is now 44-45.
The market is very dependent on FAAMG earnings to have RSI push into the high end of the 45-60 range.
Earnings Preview that could influence market structure
Many folks are focused on Meta’s outcomes tonight, but another company we must watch is Lam Research (LRCX). Lam is one of my favorite proxies to understand the health of the semiconductors market.
If Lam disappoints markets, it has a longer lasting impact on SOXX Semiconductor ETF and that will make its way into QQQ / NQ market structure. Vice versa is true. A strong Lam bodes well for QQQ / NQ.
For this reason, if Meta disappoints tonight but Lam does very well, I am inclined to believe that Semiconductors can come in to later defend any large NQ selloff in coming sessions.
Tonight, here’s what’s on deck for Meta:
Q1 EPS of 4.36/share
Q1 Revenue of 36.22 Billion
In past few quarters, I believe that Meta has gained a lot of China revenue from Pinduoduo’s TEMU ad spend. I believe TEMU’s ad spend has been very aggressive over the past 18 months (good for Meta), but it may not be a good idea to expect attribution from TEMU to be as extravagant as previously. Especially since U.S. / China relations are still floating the idea that additional tariffs could be used on ecom companies.
My DCF conclusion study on the stock is that it does well long-term. In the short-term, I think revisiting 440-450 could be a nice entry into the name for an eventual roadmap to 550-600. If it rallies afterwards, I’ll look to see how that will influence bullish scalps on ES/NQ tomorrow.
I don’t currently have a position in Meta, but if it sells off tonight, I will revisit the name and share thoughts if appropriate.
I will have more thoughts on ES/NQ after the market goes through price discovery once FAAMG earnings are out.
Remember - no FOMO!
PDD’s trip to 130 from 120, Costco’s trip to 735 from 715, Apple’s trip to 175 from 170, Tesla’s trip to 160 from 150, and now even LULU going back in the money are some recent examples from a stock-selection standpoint.
The stronger the market sells, the better it will be for you because I’ll be able to identify more and more setups.
These opportunities were not available had they not gotten to my key levels!
Stay tuned for more
-Larry
Helpful Resources to understand my methodology (this will be updated on an ongoing basis):
Educational Guides: https://larrycheung.substack.com/t/educational-guides
DCF Conclusion Studies: https://larrycheung.substack.com/t/dcf-modeling-fundamental-analysis
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.