Maximizing Returns with High-Probability Setups
Dow Drops 0.9% as Defense and Energy Shares Weigh on Market - The Breakout Will be Tested
The high-probability setups delivered precision results once again. We saw bullish targets hit and exceeded for JPM, WMT, Dow Jones, MSTR, Bitcoin, IBIT, and ETH, while our bearish setups for AAPL and TSLA are playing out.
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High Probability Setups Update
As discussed over the weekend, we are entering an expected period of consolidation. While the VIX signaled a potential spike, the week began with bullish momentum as anticipated. Let's review the latest market updates alongside the charts. Ultimately, news headlines often serve as the catalysts that drive price in the direction already suggested by the technical setup.
Defense and Energy Stocks Drag Markets Lower Despite Tech Resilience
The Dow Jones declined -0.94% and the S&P 500 pulled back -0.34%, despite the latter briefly touching a record intraday high that matched our $6,963 level with precision. The session’s weakness stemmed primarily from a sharp selloff in defense stocks after President Trump announced via Truth Social that he would prohibit dividends and stock buybacks for defense contractors until production delays and executive compensation issues are addressed. The unexpected policy announcement sent shockwaves through the sector, with Northrop Grumman and Lockheed Martin each tumbling roughly 5% and pulling the broader industrials sector XLI down -1.9%.
The news simply served as a trigger for an overbought condition. The LMT chart is a textbook example of this, showing a shooting star pattern printed above the Bollinger Band, validated by strong daily volume and an RSI reading above 70. This technical setup suggests the news merely provided a catalyst for a healthy pullback that was already highly probable. Once the price returns to the Bollinger range there can be bullish continuation.
Energy stocks compounded the market’s losses, declining 1.2% as crude oil futures fell 2.0% to settle at $55.99 per barrel. The weakness followed President Trump’s disclosure of a deal securing 30 to 50 million barrels of oil from Venezuela, a supply agreement designed to ease price pressures. Meanwhile, healthcare provided a bright spot, surging 1.0% on M&A activity. Eli Lilly and AbbVie each climbed over 4% following reports of their respective acquisitions of Ventyx Biosciences and Revolution Medicines. Technology stocks delivered mixed results: strong gains in Alphabet (+2.5%) and Nvidia (+1.0%) helped keep the Nasdaq 100 flat 0.06%.
When observing the technical chart for XLE (energy sector ETF), the bearish candle printed on Monday above the Bollinger Band and validated by high volume offered a reasonable anticipation of a pullback. Sector ETFs typically respect technical indicators, and these overbought conditions usually lead to a reversal. If you see the charts for CVX and XOM, they are identical to this one below.
Point taken: technical analysis helps us anticipate how vulnerable an asset or index may be to news events. With that insight in mind, let's proceed to the updates on our current High-Probability Setups.
Today’s agenda:
DIA
JPM
TSLA
AAPL
BTC
IBIT
ETH
VIX
NDX
SPX
Let's continue: Unlock all the analysis by upgrading to a paid subscription. The profit from just one successful trade can easily cover the monthly, and even the annual, cost of the subscription.
DIA
The Dow Jones ETF was marked in the Weekly Compass las “Long” or buy with $483.0 as the invalidation level for the bullish setup highlighted based on technical indicators, with $487 as immediate target followed by $491 and $496. The bullish move was impulsive last week and continuation was likely despite of the geopolitical news during the weekend. As you see the first target was reached and surpassed with conviction on Monday, the upper Bollinger band was touched but not breached, bullish continuation was likely as on Tuesday considering price action, but that day the band was breached, raising alarms. Today, the price opened with a gap and above the Bollinger band, touched $496 with impressive precision and reversed.
When a resistance is surpassed it can become the new reference for a stop loss, and when a resistance rejects the price while the price action is above the daily Bollinger band, there are good references to lock profits. Solid 2.6% move, 7.8% if using UDOW (x3), and for the options users, much more.
JPM
I mentioned in the Weekly Compass the possibilities for a bull flag, and that’s what happened; technical indicators and price action indicated bullish continuation, support and resistance levels helped us to assess potential destinations.
In this case the third resistance was reached on day one and reversed quickly, on Tuesday the bullish move consolidated but found the same rejection. We have studied that rallies at the beginning of the week must be assessed carefully when the market is in a mature stage. Today’s decline is a validation of a potential evening star formation. The high probability setup reached with conviction the third layer with a 3.1% gain, 6.2% with the leveraged 2x ETF JPX, or much more with options.
Remember, having the levels is one part of the equation, a correct technical interpretation gives you the directional expectation. I provide that professional reading considering the indicator that better explains the price action and the security. There is not a single golden indicator.
TSLA
I’ve been bearish on TSLA during the last two weeks, and the stock is falling with conviction. High volatility assets like TSLA, NVDA, PLTR or BTC can present significant spikes in the middle of a broader bearish formation (remember that I use weekly charts in the Weekly Compass).
The chart for Tesla presents bearish conviction losing the 50DMA, and other moving averages studied in longer timeframes, after today the chart suggests: