This week’s edge: markets seriously deteriorated as leadership breadth dropped, and 22 of our covered portfolio became Breakdowns. We’re going to trim what we can and avoid broken names until they get back into an adequate range. Cash will be a big position and we’ll stay engaged with companies that are still at defined levels.
Every week, IWP sorts the 60 stocks and ETFs we cover into 4 different trend regimes. We typically publish a few numbers for each: entry price range, target range, and a stop loss location where the thesis breaks down. We publish these before market open on Monday.
The names we cover are large and liquid and spread across technology, semiconductors, energy, defence, healthcare, retail, metals and European listings. Our goal here is not to debate which one is a good company, but what is an attractive price range to trade these. Good names bought at the wrong price still lose money, and that gap is the whole reason this exists.
We buy strength that has proved itself rather than weakness that might. When a beaten-down stock comes back hard, we may be late to the names that bottomed-out, and we make these decisions deliberately. Patience may cost us at first, but it also keeps us out of freefalls.
If a level looks wrong to you, please let us know in the comments. We’d love to get your input and perspectives.
How Our Trade Plans Work
We classify each stock into a regime that includes: Trend-Hold, Transitional, Repair or Breakdown. These are based on the 1D EMAs, and also consider the 1W regime. Every level traces back to a specific indicator.
T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Our regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout, Transitional gets half or nothing, Repair gets a starter only after a reclaim, Breakdown gets none until a reclaim confirms.
We also include two stops, each having its own job. The trade stop is the tactical level where we step aside and let the position go until we recalibrate and reassess.
Then you have the regime invalidation. That’s as deeper level where the thesis breaks and we need to reconsider the new regime the stock is in. We publish both for every setup. Trade stop first comes first.
Every level discussed is relevant for the week, until the next weekly plan is published. If neither the first target nor a stop gets hit, check out the following week’s plan to see what’s the best move to do next. We typically take a partial exit at T1 when it comes, and also recalibrate the trade stop just below T1 to lock in a certain profit on the remainder.
We size by risk, so we decide what a single losing trade may cost, and divide it by the distance from entry to stop. The wide-stop names are not off limits, but may be small allocations for example.
If you need help sizing a position, you can check out IWP’s free position sizing tool here.
This update ranks 60 names. The goal is not to trade all of them (not even most of them).
But most weeks, a handful of stocks sit at a level worth acting on and the rest are there to show how they evolve.
Market Conditions
The S&P 500 SPY 0.00%↑ closed at 763.25, Transitional and down 2.0% on the week, while the Nasdaq-100 QQQ 0.00%↑ at 709.80 is Repair and down 5.5% on the week.
Beneath the surface, regime breadth deteriorated:
Breakdowns went from 20 to 22,
Repairs rose from 5 to 11, and
Trend-Holds fell from 22 to 11
Regime downgrades outnumbered upgrades 25 to 10, a clear risk-off tilt.
The selling concentrated in CRWV 0.00%↑ -25%, NBIS 0.00%↑ -25%, ASTS 0.00%↑ -20%, AMAT 0.00%↑ -19% on the downside, while LMT 0.00%↑ +8%, NOC 0.00%↑ +8%, INTU 0.00%↑ +7%, NKE 0.00%↑ +7% held up against the tape.
Fresh damage showed up in AMAT 0.00%↑ AVGO 0.00%↑ BABA 0.00%↑ IFX.DE, LRCX 0.00%↑ and 3 more, dropping to Breakdown. Trend-Hold was reclaimed in COST 0.00%↑ LMT 0.00%↑ UNH 0.00%↑ and WMT 0.00%↑.
The Week Ahead
We’re expecting six companies included here to publish earnings this week: NFLX, NOC and RTX on Tuesday October 20, LRCX and META on Wednesday October 21, LMT on Thursday October 22.
For these names, the trade plan is based on certain triggers that, if hit before earnings, may leave us exposed to a binary outcome. If we would want to avoid that, we would not act on any of the stocks reporting earnings this week and re-think them after friday’s close.
Other stocks reporting next week include FFIV and SOFI on Tuesday October 27, GOOG, MSFT and SMSN.L on Wednesday October 28, AIXA.DE, AMZN, FTI, INTC and LLY on Thursday October 29, XOM on Friday October 30.
This Week’s Playbook
Out of the 60 names we cover, only 2 are set up to be bought into weakness, with a dip band already defined (AAPL, MSFT).
The other 57 (95 % of our coverage), need to reach a level that has not arrived yet: 23 need a trigger to fire, 30 need a reclaim first, and 4 have an entry range too close to the stop to be actionable.
Trend-Hold, full exposure within set levels.
On a pullback to support: MSFT, AAPL.
Only on strength, above the trigger in the table: DG, XOM, LLY, BRK.B, WMT, UNH, COST, SHOP.
Transitional, half size or nothing.
The trend is not confirmed, so a position here is a probe rather than a holding.
On a pullback to support: OSCR.
Only on strength, above the trigger in the table: TGT, RTX, META, RBRK, XRH0.L, FFIV, NOC, INTU, PLTR, SPY, and 5 more (see table below).
Repair, starter position only after a reclaim.
Basing, not yet trending, nothing until price reaches a trigger point: ADBE, NKE, AMZN, FTI, GOOG, TSM, ASML, COPX, INTC.
Breakdown, no exposure until a reclaim confirms.
Not every dip is a setup, and cash is the position: LULU, ITA, BABA, NVO, NFLX, GLD, AIXA.DE, ORCL, SOFI, IFX.DE, and 11 more (see table below).
For the ones where entry is too close to stop, skip entirely: LMT, NVDA, QQQ, XRPI.
Also, cash is a position.
Only 2 of the 60 names we cover offer a price worth buying this week. For the other 57, it’s best to hold cash instead, especially considering that both benchmarks lost their own trend.
So, cash is the position for now. We would rather lose a week of action than a month of capital.
Sitting still is not the absence of a decision. Cash costs nothing while we wait, it holds its value while the market get better, and it is the only position that improves as the market gets worse.
If we finish the week having done nothing, that’s still a good plan for us.
How Last Week Went
The 5 names we published setups for last week, and what price did to those levels. Entries, targets and stops are checked against the daily bars, so a miss reads the same as a hit.
LLY (T1 hit)
We entered at 1,165.00 to 1,173.00 with T1 at 1,215.00. T1 was reached last Wednesday, and it closed for the week at 1,257.03.
It is Trend-Hold now.
NVDA (Stop-loss hit)
We entered at 227.82 to 229.05 with T1 at 235.20. We entered on Tuesday, but it then closed below the stop at 222.14 on Wednesday, before closing on Friday at 214.13.
It is Repair now.
ASML: No entry was triggered as the price didn’t reach our zone. The name fell 7.8% to 1,641.52, so the level that did not trigger is the reason there was nothing to lose. It’s in Repair now.
AAPL: Entered at 345.34 with T1 at 357.74.
It almost reached T1 throughout the week, but closed on Friday at 343.46. Still holding.
It is Trend-Hold now.
SPY: Entry around 762.06 to 770.21 with T1 at 796.40.
It almost reached T1 throughout the week, but closed on Friday at 763.25. Still holding.
It is Transitional now.
As for the remaining stocks we covered:
Of the 37 that had a valid entry range 22 reached it
11 of those reached T1
4 closed below the stop.
The 23 names we avoided or skipped averaged -3.4% on the week
11 of them finished higher, and the best, LMT, rose 8.3%.
On the other side, CRWV wend down -25.2%
Top 5 Actionable Setups
This week’s 5 actionable setups were taken only from the Trend-Hold group. We deliberately exclude anything that is overbought above RSI 73, that has an inverted EMA structure, and anything without at least 1 ADR between its entry and its stop.
Preference goes first to names sitting within 3% of their 20-day EMA, then to the strongest trends by ADX with momentum confirming.
Microsoft Corp. (MSFT), Last close: 529.05
Setup: Microsoft Corp. held its Trend-Hold, little changed on the week. Daily and weekly are aligned in Trend-Hold. Price is sitting above the 1D EMAs with the 1D EMA20 at 522.54 (that’s the first line to defend). Daily RSI 57.3, MACD bullish. Steady momentum.
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Entries:
Pullback: 515.31 to 528.52 (the support shelf under price to just under Friday close)
Breakout: above 551.15 (20-day high)
Targets:
