Technical Analysis Weekly Recap - March 1, 2025

The team reviewed the stock market’s technical performance over the past week, focusing on market sectors and major tech stocks. Discussions covered the potential economic impacts of recent interest rate hikes and quantitative tightening by the Federal Reserve, as well as the possibility of significant wealth transfers during an economic downturn. Trading strategies and market conditions were explored, including potential opportunities in defense stocks and a financial services stock.

Next Steps

Monitor the S&P 500 for a potential breakout or breakdown within the 5818 to 5946 range.
Research defense companies, particularly those producing munitions such as Javelins, for potential investment opportunities.
Investigate insurance carriers that may be affected by potential Medicaid/Medicare cuts.
Analyze AI-related stocks for potential buying opportunities during the current pullback.
Research discount retailers and generic brands for potential investment opportunities amid potential Medicaid cuts.
Monitor Bitcoin and related stocks like MicroStrategy ahead of the March 7th crypto summit.
Review personal trading strategies and adjust based on current market conditions.
Monitor the market for opportunities in defensive sectors like utilities, consumer staples, and healthcare stocks.
Track the real estate investment trust (REIT) sector for potential profit-taking or new entry points.
Stay informed about economic data releases and Federal Reserve decisions that may impact interest rates and market trends.
Continue managing covered call positions, considering rolling options or adjusting strategies as market conditions evolve.
Follow up on the Target position entered around the $125 level, monitoring for potential support or further downside.
Implement more cautious entry strategies, such as partial positions or waiting for trend confirmation, given recent market volatility.
Identify stocks with high implied volatility that align with current market momentum for potential covered call strategies.
Explore setting up a free TastyTrade account to utilize their implied volatility screening tools for watchlist creation.
Assist in confirming momentum and chart patterns for potential covered call candidates.
Share information on using puts as a protective strategy when selling covered calls.
Continue monitoring sector rotations and market trends to inform trading strategies.
Explore using indices or buy-write index ETFs for covered call strategies.
Create a recording explaining the desktop view of the momentum tracking tool and share it with the group.
Schedule a session to explain the desktop view of the chart tool in more detail.
Investigate how dividends are paid out on BXD and BXM buy-write index ETFs.

Summary

Tech Stocks and Market Performance

The team provided a detailed technical analysis of the past week's stock market performance. The Dow Jones Industrial Average saw slight gains, while the Nasdaq and Russell 2000 declined. The S&P 500 had a strong rebound on Friday after multiple down days. Volatility remained elevated, with the VIX index holding around 19.

Key observations:

Technology stocks struggled, while consumer staples and real estate benefited from sector rotation.
Market caution was advised, with some members suggesting remaining in cash until a confirmed bounce.
Major tech stocks such as Apple, Amazon, Google, and Tesla showed mixed performances.

Market Decline and Trading Strategies

The discussion focused on market declines, particularly in the S&P 500, Nasdaq, and Dow Jones Industrial Average:

S&P 500: Up 0.87% YTD
Nasdaq: Down 1.16% YTD
Dow Jones Industrial Average: Up 2.35% YTD

Various trading experiences were shared:

Inverse ETFs were used as hedging strategies.
Some traders faced losses due to failure to adjust strategies in response to market trends.
Potential crypto market movements were discussed, particularly regarding the upcoming summit and its possible effect on sentiment.

Potential Economic Impacts of Rate Hikes

The group examined the broader economic implications of recent interest rate hikes and quantitative tightening:

Concerns about a potential recession and its effect on asset valuations.
Discussions on commercial real estate loans coming due, possible layoffs, and cuts to social programs like Medicaid.
Wealthy investors and corporations may be preparing to acquire assets at lower prices during an economic downturn.

Trading Strategies and Market Conditions

Different trading strategies were explored, including:

Range trading with stocks like ELF, attempting to recover losses by buying at lows and selling at highs within a sideways pattern.
Emphasis on understanding trading psychology and aligning strategies with personal risk tolerance.
Monitoring the broader economic landscape, such as layoffs and their potential impact on consumer spending.

Defense Stocks and Insurance Impacts

Recent geopolitical developments were noted as potential catalysts for defense stocks.
The insurance sector could be impacted by changes to Medicaid and Medicare, potentially leading to higher insurance rates.
Some investors viewed defense stocks as an opportunity, while others were monitoring insurance market shifts for potential trades.

Financial Services Stock Trading Strategy

A financial services stock was analyzed for a potential trading opportunity:

The stock had consistent support and resistance levels on the weekly chart.
It recently dropped to a prior support area and had moved above three moving averages, though still below the 200-day moving average.
Some traders considered this a buying opportunity, given sector strength and potential upside.
An options trade setup was also explored for additional risk management.

High-Volatility Stocks for Covered Calls

The group discussed strategies for writing covered calls on stocks with high implied volatility:

Screening for stocks with good premiums using tools like Bar Chart.
Looking for options premiums that yield 1–3% of stock price within a two-week period.
Exploring buy-write ETFs such as BXD and BXM, which automatically implement covered call strategies.
Noting that S&P 500 buy-write ETFs returned approximately 20% last year, though acknowledging this level of return is not typical in the long run.

Final Notes

The discussion covered a wide range of topics, from technical market analysis to sector-specific investment opportunities and trading strategy adjustments in response to economic conditions.

Members are encouraged to:

Stay informed about economic data releases and Federal Reserve decisions.
Monitor trading strategies and adjust risk management based on market conditions.
Continue researching potential investment opportunities, particularly in defensive stocks, AI stocks, and high-volatility covered call candidates.