El Tigre Watchlist, Tuesday July 12th, 2022

$SPX (weekly) we have been consolidating sideways for the past 4 weeks and that’s clear on the weekly timeframe.

Last week’s candle close did not provide us with a clear direction as the weekly candle closed in the range of the prior week.
For the last 4 weeks, we have been slowly consolidating towards the upside. Going into this week, we need $SPX to close above $3,896.8

We are currently monitoring how price action is going to react toward the 5-day exponential moving average (EMA). Ideally, we would want to see the price to hold above the 5-day and then push higher towards the 9-day EMA, blue line. However, since we have been in a downtrend, and are currently below the EMA’s this would be trading against the current trend. Be very careful. 

$SPX (daily) we cleared the daily 5/9/20ema moving averages and are currently in between support and resistance.

Several potential short entries :

  1. Wait for daily a close below 3854 – this should come sooner than later as the 5/9/20ema are all facing downwards.
  2. Wait for a bullish breakout move over current horizontal resistance toward weekly 9ema and descending channel resistance then following rejection there can either scale into a short position or wait for false breakout reversal moves back below 3916.
  3. The third scenario would be if we break below 3838. If we lose this level this should trigger the sell-off. 

Nvidia $NVDA (weekly)  the weekly time frame is showing a descending triangle with more downside to come if we can hold below $152. 

Keeping things simple, I went ahead and connected prior highs with prior highs, and prior lows with prior lows.

We can see a trend of lower highs and lower lows from this chart leading to a Descending Triangle.

Trading this pattern is rather easy if you follow these steps.

  1. Size in accordingly.
    • We do not want to open a full position right away since we are currently in the middle of the upper resistance, $158.69, and the lower support level, $151.03.
    • Personally, I like to do a 33/33/33 entry, meaning if I want to buy 33 contracts total, I would purchase 11 for around $151 and wait for price action to do its thing.
    • You would look to buy another 11 contracts if we price were to move up towards $158.69 and reject. The rejection of this level is critical. If we do not reject, cut losses and move on. If we do reject, buy another 11 contracts.
    • I would also look to buy contracts once we have a clean break below $151 or $150.
  2. Use either the exponential moving averages or the simple moving averages to follow the trend.
    • Here is a video to discuss how to use Moving Averages: https://www.youtube.com/watch?v=ikOSIJ4lOXk&list=PLbvI4itGaQQUm5ZuvvCFjQNxQu_v82JHX&index=1
  3. Lock in profits and reduce risk whenever possible.

Nvidia $NVDA (4 hours)  we can see a head and shoulder pattern is formed and well need to fall below the $151 to trigger a sell-off. 

The right shoulder of this head and shoulder could still be forming so be cautious of that. Ideally, the upper level for the right shoulder seems to be around the $155 / $156 price level. If you are currently in a position, you would be looking for price action to reject this level and you can go ahead and average down on your position.

The math behind this trade is fairly straightforward:

  1. The range between the top of the head and the neckline, $158.69 and $151.03, comes out to $7.66
  2. If you were to subtract the range from the neckline; meaning $151.03 – $7.66, you would get $143.37
  3. So ideally, a break below $151 should lead us to sell off down towards $143.37 on $NVDA

These are the option contracts that I like for NVDA downside

  • Weeklies: I like to trade weekly contracts on an intra-day basis, meaning I like to scalp them for a 20 – 35% return on investment. If I can squeeze more out of them, by any means I would but the goal is to be between 20 – 35%. I like the 140 and 145 contracts for  Friday, July 15th. A good amount of volume in them as well these are currently out of the money but we aim to see them get closer to the money if not in the money.
  • Two weeks out: I like the $130 and $140 contracts for July 29th to swing overnight.

Tesla $TSLA (weekly) a bear pennant is being formed and continuation towards the downside seems highly likely. 

If you’re not familiar with how to trade bear pennant, is very similar to a bear flag.

During last week’s price action Tesla ended up touching the upper resistance at $773 of the pennant and retraced it almost immediately.

To kick off this week, we sold off below the $732 level and are now trading at around $703.

Main levels to focus on is $700, $702, $708, $720, and $732 for now. 

The range between $708 and $720 – I will consider this to be the premium burn range. This will be where buyers and sellers are fighting to pick the direction we head for the day.

Ideally, I would like to be short on Tesla if price action is able to stay below $708 with a $702 breakdown being what we need to see a real sell-off.

Above $720, I would be bullish and can see the price push higher to $732.

Tesla $TSLA (4 hour) formed an evening star and we are targeting $665. 

Option contracts to consider buying on Tesla:

  • Personally, Tesla contracts are very expensive and unless you have some serious cash, I do not see a need to buy contracts that are not for this week.
  • I like the $640, $650, and even the $670 puts for July 15th.