Welcome back, everyone.
We had another great session yesterday with the S&P selling down to not only our conservative target of 6889, but continuing lower to set a low just above our maximum downside target of 6857. The only unfortunate part of this was waiting for that specific level to hit to flip into longs. Instead, the market bounced just above it and sparked a rally right back up to the 6932 Point of Control (POC). While missing the exact entry is a bummer, the levels worked out as planned, and once again, Volume Profile comes out on top.
It is funny to see how many people claim this method of Volume Profile is wrong because we don’t use generic value areas and never have a set timeframe. Meaning, the look-back period constantly changes based on the overall trend. This concept is mind-boggling to them, but nearly every day it continues to work. The only time Volume Profile struggles is when we get a bunch of fake-outs in a single session. For example, picture two value areas with a low-volume node in between. 95% of the time, price will remain inside a value area or break through a low-volume node and continue inside the next value area. Rarely, we get a session where price balances at the low-volume node, filling in that area. There is not much you can do there; you are bound to get chopped up every once in a while.
For a little more insight on this before moving on: value areas are bell curves. The tails of the bell curves are extremes and are highly unlikely to sustain price. Every so often, you get price filling in a decent amount of volume at the extremes. Overall, this is just an uncommon occurrence, but it does happen.
Now, let’s shift our focus to how the stocks are doing.
Stock Watchlist Updates
Walmart (WMT): Continues to rally, up almost 30% with LEAPS up 250%. This was such an explosive call with a clean and simple setup. On a daily timeframe, price was coiling with higher lows and a clear ceiling. This was an extremely bullish chart that has worked out picture-perfect.
Building Stocks (IBP, BLD, AGX): IBP and BLD bounced back strongly while the broader market continued to sell off. AGX is lagging behind the pack, making this recent dip attractive for longs. One note I do want to mention is the gap between home sellers versus buyers. Recent data shows the largest gap yet, with the number of sellers being far greater than the number of buyers. Overall, the building sector could see a slowdown, but remember that Trump’s main initiative is to keep home prices elevated. I wouldn’t look too much into this data, to be honest.
Crypto & MicroStrategy (MSTR): Crypto is getting slammed to new lows while MSTR continues to take a beating. As most of you know, I am quite against MSTR, which is underperforming Bitcoin by a massive margin—selling off nearly double what Bitcoin is doing. The main point is that I don’t understand the hype in buying a stock that holds Bitcoin rather than just buying Bitcoin itself. Not only does the correlation of MSTR not always align with Bitcoin, but the stock price is largely based on two factors: how many new shares are flooded into the market and investor sentiment on Michael Saylor. If investors don’t want to buy MSTR, it will underperform Bitcoin regardless of what the coin is actually worth. This company is solely driven by hype. Right now, everyone is wishing they bought less MSTR.
Google (GOOGL): Earnings numbers are robust, but concerns over CapEx (Capital Expenditures) while software stocks get hit is not a good look. It is questionable if this CapEx is justified; it relates partly to Meta when they introduced the metaverse. While AI has an actual use case, the spending could be excessive. Software CapEx revealed that all the money dumped into AI was not bringing an immediate return. Google making a move to spend way over consensus is quite bold. Investors hate uncertainty, and this leaves quite a bit of it. Don’t get me wrong, this is a phenomenal company with a bright future, but we need to step back and see what has happened to other companies doing the same.
Microsoft (MSFT): Sold all the way down to the target and finished green on the day after we called out a long. As long as Google can remain strong—or at least see minimal selling—this stock can help pull the Nasdaq back up. I am still not fully on board in terms of expecting this stock to move right back to highs, but I think we can see a solid bounce back up to 440-450.
AppLovin (APP) & Palantir (PLTR): Both continue lower after the long setup was invalidated. Reminder: when a setup invalidates, you need to cut quickly. Both stocks got absolutely hammered today. This taught a very important lesson to many who bought back into PLTR after earnings. I wanted a close back above 164 and it never happened; the stock is now down 17% in two days.
That wraps up the stock coverage for today. Let’s now turn to the levels on the S&P.
