7/9 Daily Plan: Minor Tech Pullback off Overextended Levels
Looking for new sequences
Hi Members -
This note will be short as I’m simultaneously doing two things in the background: actively looking for new bullish sequences to share and 2.) doing another DCF Conclusion Study to publish later this week.
For context, many of QQQ ETF’s top 10 stocks are trading near the Bull Case. This generally means a few things:
A new catalyst (usually earnings season) is required to shift the Bear/Base/Bull cases higher for these companies. Earnings season will begin shortly. Patience is required at these levels.
There needs to be some type of Macro data point that allows for further valuation expansion
A consolidation period needs to happen or an overheated advance can lead to about 20-30% retracement of the recent large rally (completely healthy). This type of give-back tends to be healthy as it forms a “higher-low” on the Daily Chart visually speaking.
With markets at the highs and staying pinned there, my sequence list will have to be conservative.
China
I like the two KWEB attempted bounces off 27 back to 28. I think KWEB can see another 3% towards 29 within 2-3 weeks.
Similarly, I like BABA’s attempted bounces off 72-73. It can see 77.8-78.5 in relatively high probability manner in the foreseeable future. That’s about another 2-3%.
On PDD, opinion is unchanged. It’s going to 150 on longer timeframes.
TCOM reaches 50 from 46 as I expected. Lift Stops if held, and let it run to 53-54 where it may form a “Lower High” if China mean-reverts there.
Dow Names
UNH is balancing at 490-492. I think it could be ready to make a move towards 500.
JNJ is balancing at 145-146 for a move back to 149 in my opinion.
Other banking names previously mentioned (JPM/AXP) look fantastic. Lift stops. Continue to hold.
Visa and Mastercard completed the 2nd sequence I was looking for just recently. They are resting. I’ll see if there are more sequences in these names later on.
Technology
Many tech names within QQQ are now extremely overheated. I can never advocate shorting them but I’d say now is a great time to do covered calls on them if you own them in size. Even if they go higher, doing covered calls on names trading at Bull Case is as objective as it gets for risk management.
Semiconductors are a top buy on crater idea. If any name in my DCF Conclusion Study within SOXX ETF trades at/near/towards the Base Case, I will actively find an entry there.
Retail (Disclaimer: Any name within Retail outside of Costco and Walmart is considered High Risk/Contrarian)
Retail has been an extraordinarily tough sector outside of star performers Costco and Walmart. Best names in retail for now are dip-buys on Walmart if it sees 65-67 again (Limit Order). I will revisit whether Costco merits a higher bull case in my model.
Nike has been discarded by investors. Is it a long right now? It’s more of a Cash-Secured Put candidate or a Limit Order Buy if it reaches 56-57. That level is the 2020 Covid low on Nike. 56-57 would be the Strike I would look at on any Sell Put strategy for Nike. Nike can see 85-90 again within 12 months. Now 72.
ULTA has faced substantial heat in 2024. It’s a high-risk/contrarian idea to go from 395 to 410. Any serious upside expectations have to be kept in check on retailers.
Expedia is a high-risk/contrarian idea to revisit 138-140/share from 128-129.
Discount retailers FIVE and DLTR continue to face unprecedented bearish pressure. I will again to bullish scalp them when I see some type of recovery pattern. It doesn’t appear to be ready yet.
LULU gave investors a chance at 350 to reduce positioning. The bearish force on LULU has been astounding. Again, a good company but the sector headwinds are manifesting themselves into lower highs and lower lows for the retail stocks.
Macro Ideas
Watchlist: Once deflationary data starts coming back (CPI around ~2%), TLT will make a trip back to 100-105.
All other Ideas I’ve previously discussed, I still like.
I will share more Ideas/Sequences once we get a proper pullback. A pullback would be welcome at this point.
In the meantime, I will continue fine-tuning our understanding of risk/reward on the indices with DCF Conclusion studies.
-Larry
Important Links (Organized DCF Conclusion Studies By Indices)
Semiconductor SOXX ETF Top Stocks DCF Conclusion Studies (Newly Added - will add the other SOXX names in here shortly): https://larrycheung.substack.com/t/soxx-etf-top-10-dcfs
DOW Top Stocks DCF Conclusion Studies:
https://larrycheung.substack.com/t/dow-etf-top-10-dcfs
QQQ ETF Top Stocks DCF Conclusion Studies: https://larrycheung.substack.com/t/qqq-etf-top-10-dcfs
SPY ETF Top Stocks DCF Conclusion Studies: https://larrycheung.substack.com/t/spy-etf-top-10-dcfs
Conclusion Table on Dow and QQQ ETF Stocks
Link to DCF Full Archive: https://larrycheung.substack.com/t/dcf-modeling-fundamental-analysis
Link to Educational Guides: https://larrycheung.substack.com/t/educational-guides
Q&A: Why I focus on NQ as a primary market.
My focus: I now focus about 95% of my attention on price action when it comes to the indices. I would strongly encourage spending lots of “screen time” for folks who want to navigate the market.
Note: I publish Monday-Thursday. 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.