Good evening. Equities are consolidating and have paused right at major resistance areas on all of the major indexes and most sectors. Many stocks making moves are doing so in the wake of earnings reports and we have chosen to stay away from them due to the inherent risk involved. I have scanned hundreds, if not thousands of charts, this week and I simply have not found many set-ups that are worth placing directional trades in that do not have upcoming earnings, or that have already made their move after earnings. If the broader market breaks out to the upside I would rather initiate long positions on a retracement of the breakout rather than anticipate it. Placing trades based on breakouts (up or down) has also proven to be difficult in recent months. Cash is a position and I suggest trading lightly until have a better sense of direction which should be resolved in the coming days. We currently have a short position in the DJIA (short DIA) hedged with a short position in treasuries (long TBT) and we were stopped out of two long positions today. I have listed one long trade set-up below in Morgan Stanley that I like for those interested and we will be releasing new plays in the coming days. Please email me with any questions.
Long MS - MS gapped higher on 7/21 after a stellar earnings report and has been consolidating in a bull flag for a couple of weeks. The stock has broken out of the bull flag to the upside and looks poised to test its 200-day SMA which is about +5% from current levels. If the broader market fails at these levels MS will also likely fail so a tight is suggested.