Hey everyone, Robert Roy, founder of WealthBuildersHQ.com, and welcome to this edition of Trade With Rob, which is for May 4, which is a Tuesday, 2021. Markets just closed up, so let’s go ahead and take a look, first, at the S&P 500 and see what’s going on there.
So, what are we looking at here? Great Fib, of course. We’ve talked about this over the last couple of weeks now, and we had a nice pullback here on the 20th, and we kept bumping our head on 4181, 3 days in a row. On the 23rd of last month, we pushed up to the 4191 level which is the top of the Fib, or the all-time high up to that point. [Later on,] slightly higher all-time high, but not an all-time closing high. And then, we played every day for 3 days, back and forth, 4181, 4191, and 4200, those three levels until Thursday of last week.
Thursday of last week, we rocked. Massive gap up, ran to all-time highs, then gave every penny of it back, came right back to the 4181, and we closed up (down compared to the open), but we closed up from the previous day’s closing price. And then on Friday, we gave it all back. Monday, we gap up, ran a little bit higher – not an all-time high at this point – still nice highs, and ended up giving it back, still closing higher than the previous day, but a black candle for the day.
You can see the last 4 or 5 candles have all been black candles, and a lot of it resonating around that 4181-4200 level. So, we’re still in a bullish bias. The 8 (EMA) has flattened off; I’d like to see it curl up a little bit, but we’re not going to get that until we get off of that 4181 level.
People are looking at this, traders, analysts, and calling it the 4200 level. That’s not what it is. It’s the 4181 level that’s causing all of this havoc right now. The 8 EMA is there, and the 4181 is the long-term Fibonacci.
So let’s go ahead and take a look then at Caterpillar, (NSYE: CAT). So if you look at CAT, man, we’ve just been all over the place between that 226.67 and 233.11. We’re back and forth every couple of days – up and down – sometimes in the same day.
Let me share with you the details on the Fib, which we always do. Here’s our V-bottom, a sideways move right there, and then we have our VERY strong V-top, with a pullback to the .236, which usually is 3 gold stars. We pulled back to that level – life is good. We had a confluence with the 8 EMA, and we rocked from there.
Once again, we kind of played around this level here, back and forth, and if we look on a template without the moving averages (we don’t need them since they’re not moving – it’s sideways).
So yesterday, nice close. Today, we stretched down towards the zero-line. Now we want to see, can we get a wick pulling back to that 226.67 tomorrow? That’s my view of how to trade it. For you, you may say “nope, if we get a small move to the upside, I’ll take the trade,” and I have no problem with that, as long as it’s not too big of a move where I’ve taken away a lot of my target, then I am okay with taking an entry there.
So ideally, we’d take a bounce off of that 226.67 level (doesn’t have to be exact but down near it), small move to the upside, either one works. Once in the trade, you’re stop is going to want to be around 223.50. You may want to put it just below the wick down in there – nothing wrong with that, a few pennies longer. But then, our first target is going to be right here at 232.25. Sell the first half here. Move your stop to just above breakeven, and let it rock from there. If it takes you out of the second half of the trade, no harm, no foul. Second target is going to be at 238 even. 239.54 is our -.272 level, which is our next hesitation level. You never want to set your target right at resistance; you want to make sure you’re just down below there, give a little bit of room, leave some fruit on the vine for someone else to come through and eat as well. Don’t try and be a pig and get every last penny out of the trade – just get the meat out of the middle.
There you have it, ladies and gentlemen. You have a wonderful, spectacular, fantastic, and awesome rest of your day, stay focused on the quest to becoming a great trader, keep crushing it, and just remember you’re just one trade away, and I’ll see you at the next Trade With Rob.