Is this a blow off the top?

Hey Market Pilots,

Wednesday was a very interesting day. Seemingly out of nowhere many tech names absolutely exploded and went straight up for the day. Maybe this was based on CRM having good earnings, because CRM was added to the DIA and that was some sort of bat signal to the rest of tech, or maybe everyone decided to front-run Jerome Powell’s address Thursday about how they are viewing inflation.

Whatever the case may be, and we will know more by the time you read this, it doesn’t appear to be the best time to initiate trades when things are at such frothy levels. Some metrics that I use are the 3rd ATR bands on the daily and hourly time frames. In the screenshot below, you can see that the SPY and the QQQ are well outside of the daily 3rd ATR. This is ripe territory for a pullback. I also like to use the 50 SMA as support; primarily on the hourly chart. When price is too far from the 50 SMA or hasn’t touched it for an extended period of time, then price is unsupported and also ripe for a pullback to at least that MA.

Coming into the week we had good news about a COVID treatment that had just been approved and was saving lives. This is what I thought would carry the market and help with sector rotation. But Wednesday’s explosive move in the tech space sucked the life out of the names I was looking to benefit from a return to normalcy. My Moxie subscribers saw me drop a few positions early in the trading day, and then tighten up stops on the good ones. For now, I want to see how the market reacts to the Fed news and I, myself, am curious to see what they have to say.

Over and Out,

Your Profit Pilot


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