PM: Dip under 1500

By Jani Ziedins | End of Day Analysis

Jan 31

PM Update

The S&P500 is resting after the recent run up and AAPL lost its mojo.

MARKET BEHAVIOR

Stocks closed under 1500 on elevated volume. Today was the third down-day out of the last four as the hangover from the pervious euphoria is catching up with the market.

MARKET SENTIMENT

Everyone knows the market cannot go up forever, so some selling is normal and expected, but what we really want to know is if this is where the market rolls, over or if this is an opportunity to buy the dip.

So far the selling has been contained and not nearly as dramatic as one would expect after the headlines we’ve seen. Unexpected strength is bullish even when accompanied by down-days. This is not to say selling cannot accelerate to the downside, but if the market finds a bottom and support on Friday, that means near-term selling has climaxed and the rally continues. A lot rides on tomorrow and it will give us greater insight into where the market is headed.

TRADING OPPORTUNITIES

Expected Outcome:
Buy the dip if we find support, but if the market continues sliding, let it find a floor first. The uptrend will resume, but we might see better prices first. If the market decisively regains 1500 tomorrow, then it will be a good buy signal, but if weakness continues, look for support at 1490 or 1475.

Alternate Outcome:
The surge of buying might be behind us and the correction has begun. If tops were obvious, we’d all be rich by now, so we just have to trade what the market gives us. The market probably still has more upside, but we are late in the move and smart money is locking in profits and waiting for the next trade. No reason to force a trade either long or short here and the best call could be sitting this one out.

INDIVIDUAL STOCKS

AAPL is stuck under $460 and everyone should give up on the chances for a quick rebound after 6-days at these levels. In fact, we still might see new lows out of this stock as hopeful holders give up on the rebound. The best trade is stepping to the sidelines and waiting for the next tradable opportunity, either higher or lower from here. A break above $465 is buyable and under $450 is shortable, but take profits in these trades early and often because this is now a volatile trading stock and profits will disappear as quickly as you find them.

Stay safe.

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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.