A couple of notes before getting to the top risk / reward setups for this week. The volatility and speed spike which rocked markets in Q4 of 2018, has finally normalized in the major U.S. Indices. As gauged by Average True Range (ATR), market speed is indicative of what type of environment we are in. When ATR levels are high, you will see all* stocks trading in lockstep which makes individual stock trading a fruitless endeavor. It is during those times we focus on ETFs or futures. As ATR levels have now fallen to historically normalized levels, those with a method of spotting market rotation and relative strength in individual stocks should thrive once again. Here is a look at ATR Levels for the SPX and RUT:

These normalized levels allow for individual stock picking and have been historically associated with slow, grinding markets. As the indexes approach, breach, and pullback from all-time highs, all eyes will continue to be on them. Soon however, I think a market of stocks instead of a stock market will be the theme overall. These weeks risk/reward setups include both stocks and ETFs as there are some great setups in ETFs I want you to take a look at.

 

TLT

DIRECTION BUYZONE SELLZONE RISK/REWARD VEHICLE
LONG 122.50-123 129-130 -.50/7 EITHER

Thursday saw a gap up in TLT, accompanied by heavy volume. The 50 day moving average was recaptured as price attempts to break out of the falling wedge pattern. That level of volume indicates institutional buyers are adding a TLT position and the levels in which they bought will be defended. I like TLT as part of a balanced portfolio. If you buy options this should be taken several months out as it isn’t a fast mover.

JKS

DIRECTION BUYZONE SELLZONE RISK/REWARD VEHICLE
LONG 18.50-19 27-28 -.50/8 OPTIONS

JKS has been coiling up in price acceptance mode for the better part of two months. I think we get a pullback to the mid point of the triangle pattern which will provide a good entry. JKS sports over 20% short interest so it has the potential to make significant moves higher if shorts are forced to cover on a move higher.

 

NTES

DIRECTION BUYZONE SELLZONE RISK/REWARD VEHICLE
LONG 260-263 282-285 -3/20 OPTIONS

NTES is slowly and methodically falling into its 20 day moving average after a strong move higher. I expect buyers to defend from lower which will give us an entry point for a potential next move higher. Earnings are scheduled for May 16 so take that into consideration.

AXP

DIRECTION BUYZONE SELLZONE RISK/REWARD VEHICLE
LONG 113-114 124-125 -1/10 OPTIONS

This setup in AXP is different than subscribers to this letter may be accustomed to. In short it is based on the premise that triple tops are extremely rare in strong bull markets. AXP reached the highs once again on strong volume on Thursday making me believe the coming week will see AXP breaking out to new highs.

CTRP

DIRECTION BUYZONE SELLZONE RISK/REWARD VEHICLE
LONG 43.50-44 47.50-48 -.50/3 OPTIONS

 

CTRP is consolidating a wedging back into the direction of its trend here. We see a strong upsloping 50 day moving average and the 200day moving average starting to flatten out from trending lower. As CTRP works its way into the apex of this wedge I think we can take a quick trade as it looks to resume its uptrend in the coming weeks.