Treading water

By Jani Ziedins | Intraday Analysis

Apr 19

S&P500 daily

The indexes continue treading water near their 50dma in a frustrating fashion.  Up, down, up, down and repeat until thoroughly confused and demoralized.  Just like its been for the last week, this price action continues to support both a bullish or bearish setup and the only way we’ll find out is when we get a confirmation from the indexes when they actually move out of this range in a compelling manner.

So far all this trading range has accomplished is chewing up and spiting out any premature bulls or bears with overly tight stop-losses.  Neither side has the conviction or money to push us outside this range and we will continue to hold here until either the buy-the-dip crowd or the sellers lose the battle when they finally run out of funds to support their cause.  This is turning into an endurance race between the two camps and at this stage I really can’t say which side has an edge.  Both sides seem well represented in media making it hard to use a contrarian analysis to get a sense for what is the path of least resistance.

As far as CAN SLIM rules go, sitting and waiting is exactly what we should be doing right now when current outlook is market in correction.  We need to give the market time to prove itself and when deciding how to manage your portfolio, remember it is better to be out of the market wishing you were in than in the market wishing you were out.

FFIV daily

Aside from the indecisive indexes, we have seen good price action out of some leading stocks.  FFIV popped on strong earnings and retook it’s 50dma on a gap-up this morning.  Today’s move puts it back in line with its recent highs after dropping under it’s 50dma on large volume a couple weeks ago.  This price action demonstrates how difficult it can be to respond defensively to a stock by waiting for weakness to sell.  Very few stocks make big moves that are easy to hold and often the biggest winners are highly volatile and do their best to shake traders out prematurely.  There was no reliable way to identify FFIV’s April 10th and 11th plunge was just a regular shakeout and not the start of a larger decline.  For my personal trading style, I don’t want to be stuck trying to decide if a pullback is just a normal correction or the end of a move and is why I prefer selling into strength after a nice run-up.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.