Monthly Archives: March 2020

Mar 31

Is anyone still interested in TSLA?

By Jani Ziedins | End of Day Analysis

Free After-Hours Update

It’s been a historic few weeks with this viral pandemic sweeping across the globe and grinding the world’s economy to a halt. While those headlines dominate the financial press, it’s easy to forget about the other things going on in the market. It seems like forever ago, but TSLA was the hottest trade less than two months ago. While the world has largely moved on to bigger things, this trade matters for the people still holding it, so let’s take a look.

Along with everything else, TSLA’s stock plunged in late February. But as is often the case, the higher they go, the harder they fall. At one point, TSLA was down nearly 65% from those heady highs. While it seemed inevitable this stock would tumble from those unsustainable levels near $1,000, no one could have predicted the tsunami that was coming. This was an unprecedented global catastrophe that pummeled all stocks, not just the highfliers. But that still doesn’t justify someone holding this thing as it shed nearly 2/3 of its value.

While I was skeptical of the frenzied buying that propelled this stock up nearly 100% in just a few weeks, it was obvious to most this was too good to last. If it wasn’t a global pandemic, it would have been something else. That’s why it was critical to protect our profits by following this up with a trailing stop. Not long after the stock bumped up against $1k, it tumbled back under $800. That would have been a good place to lock in some profits. The stock did a good job clawing back above $800 over the next few weeks, but that second violation of $800 was definitely our signal to get out.

Rather than “hold and pray”, we should have locked-in profits and waited to see what comes next. As individual investors, our greatest strength is the nimbleness of our size. We can jump in and out of full positions with a few mouse clicks. If we don’t take advantage of this ajility, we give up one of the few advantages we have over the larger institutions.

That said, hindsight is 20/20 and the horse is long gone. What owners really want to know is what comes next. While I like these big discounts in the other high-flying FAANG stocks, it is hard to feel the same way about TSLA’s future prospects. Without a doubt, this was a momentum story and the momentum has clearly been broken. The giddy buyers are long gone and won’t be back anytime soon. While I could see the FAANG stocks returning to their all-time highs over the next several months, it is hard to see TSLA getting back near its highs for a long, long time.

Now don’t get me wrong. This is still a great company with a great story. The stock will do well, but well is a relative term. While we will most likely return to the pre-bubble highs near $600 over the next few weeks, I wouldn’t count on anything above that for a good long while. There are a lot of people who have lost a lot of money in this stock and it will take them a while to admit defeat and get out. Until then, expect this to remain rangebound between $400 support and $600 resistance. Once these retakes and holds $600, we can revisit it as a buying opportunity.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM $TSLA

Mar 30

CMU: The importance of having a plan to be wrong

By Jani Ziedins | Free CMU

Cracked.Market University

One of the things I learned a long time ago is that while I’m pretty good at trading, when I’m wrong, I tend to be really wrong.

I’m an optimist at heart. It’s almost a requirement to surviving the markets over the long-term because we definitely go up more than we go down and bull markets last a lot longer than bear markets. That said, when things go south, they south in a hurry.

While I tend to give the market the benefit of doubt, I always have a plan for being wrong. The most obvious example is starting every trade with a sensible stop. But beyond this tactical technique, I also need a mechanism for recognizing when my outlook is flat-out wrong. When what seems like a buyable dip is really the next good shorting opportunity. Or what looks like a great short is actually the next great buy.

The most expensive mistakes we make are when we think the market is headed one way but it is actually going in the opposite direction. This is when we need to be the most open-minded about our outlook and the quickest to changing course.

I was looking for last week’s huge bounce to fizzle in a near-term pullback. As I wrote previously, “one day up, the next day down.” While that approach worked brilliantly for the first few weeks of this selloff, it stopped working late last week. Rather than alternate daily between losses and gains, the gains started piling up day after day. Cracks that should have triggered another waterfall selloff ended up bouncing even higher instead.

I could have gotten stubborn and dug my heels in like so many other traders that were skeptical of last week’s 20% rebound. But when my initial short trade didn’t work as planned, I had to acknowledge that I could have this backward. When the market refused to collapse in a waterfall selloff Friday, that was a strong indication it wanted to go higher, not lower. When the market opened strong this morning, rather than argue with it, I saw this counter-intuitive strength as a buying signal. Rather than argue with the market and lose money, I plugged my nose and bought the strength instead.

I still expect this market to pullback very soon (maybe tomorrow is finally the day), but as long as this keeps going up, my trading plan is going to keep forcing me to buy it. And for that, I’m thankful.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Mar 27

Free Weekly Analysis and Lookahead

By Jani Ziedins | Weekly Analysis

Free Weekly Analysis and Lookahead

This was one of the most volatile weeks in S&P 500 history with the highs and lows spanning more than 20%. The moves were so dramatic in fact, the index actually started a new bull market after climbing 20% from Monday’s lows! (Also making this the shortest bear market in history.)

These are strange times. I was there for the dot-com bubble. 9/11. The housing crash and financial crisis. I even have memories of 1987’s Black Monday. But few things compare to the levels of uncertainty we are feeling today. 1987 blindsided market participants and few things are as shocking as watching 9/11 unfold in real-time. But neither of those events affected Mainstreet the way Coronavirus has completely and totally shut down the global economy. Everyone was numb after 9/11, but most people resumed their lives after a few days.

Not today. Governors are instructing, if not downright ordering, citizens to stay in their homes for at least two weeks. And that is just the start. No one knows how much further this could go. Stocks rallied this week after Congress approved a $2 trillion dollar stimulus package and the Fed assured us they have “unlimited ammunition” to combat this economic slowdown. That was good enough to launch stock prices 20% above Monday’s lows. But can these things solve our problems? No…not even close.

This week’s rebound was more of a massive relief-rally and short-squeeze than a vote of confidence about our “new” outlook. While it was definitely nice to see the stock market string together a few positive days, our situation is not any better this Friday than it was last Friday. In fact, in many ways, they are worse now because this virus continues expanding at an exponential rate and this week’s shelter-in-place orders had a minimal impact on the growth curve.

As nice as it felt to see the market put together an impressive performance this week, we are far from out of the woods and should expect this historic volatility to stick around for a while. At the very least, expect prices to retest the lows over the next week or two. Maybe we find support at the prior lows. Maybe we don’t. Either way, hopefully, anyone who was savvy enough to buy this week’s rebound is also savvy enough to lock-in a big portion of those profits before they evaporate. Investors can buy these discounts for the long-haul, but traders need to be extremely nimble because today’s profits will turn into tomorrow’s losses if we allow ourselves to get greedy.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Mar 26

If you’re not taking profits, then you’re taking losses.

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis

The S&P 500 produced its first three-day win-streak since early February. Congress agreed to a $2 trillion stimulus package and the Fed assured us they have “unlimited ammunition”. Those headlines were enough to launch stocks nearly 20% above Monday’s intraday lows. Looking beyond this relief rally, the bigger question is if these government interventions are enough to solve the market’s problems or if this strength is just another fleeting bounce on our way lower.

Three days ago bears were gloating over their investing prowess. Today it’s the bull’s turn. And so goes the swinging pendulum of sentiment in this violently volatile market. While it was definitely better to be a bull today than a bear, is the Coronavirus epidemic really solved? Did our politicians actually accomplish anything more meaningful than adding $2 trillion to our national debt? Ummmmm, no. We are in much of the same place we were Monday…and last Friday…and the Friday before that. Nothing has been fixed but at least some issues have been addressed…if only marginally.

These constructive headlines were at least good enough to stem the cascade of relentless selling. That said, we shouldn’t expect prices to race back to the highs anytime soon. The world is still gripped by fear of a killer virus and all the economic damage that goes along with these extreme preventative measures.

As I wrote on Monday, this market is incredibly volatile and that means huge swings in BOTH directions. One day’s gains become the next day’s losses (plus or minus a day or two). In periods like this, if swing-traders are not taking profits, then they are taking losses. Rather than gloat over the corpses of your adversaries, be savvy enough to realize that if you hang around too long, your corpse will soon be the one underfoot. While giving up on a winning trade is always hard to do, if you don’t, the market will take all those profits back.

I warned bears a few days ago and now I’m warning bulls. Lock-in those profits and be ready to go the other direction. The next big swing is just around the corner.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Mar 25

CMU: The criticality of timeframe in trading

By Jani Ziedins | Free CMU

Cracked.Market University

As crazy as the last few weeks have been, far and away the most critical factor determining our success is timeframe. One person is buying with both arms while another is shorting like mad. Who’s right and who’s wrong? As strange as it sounds, they could both be right and make a ton of money from their seemingly contradictory trades. The secret sauce is timeframe.

I bring this up because in these short, after-hours posts, I often neglect to stress timeframe when talking about positions. While it is often obvious given the context, for new readers, I want to make sure everyone understands how important this distinction really is.

Two days ago I wrote a post about the safety of buying these levels and yesterday I told readers the opposite thing when I said this strength was shortable. The difference between these two posts is the first covered long-term investing while the second exploited the market’s daily gyrations.

Despite how it sounds like I’m talking out of both sides of my mouth, I still believe both of these cases are as true today as when I wrote them. Anyone buying these discounts and holding for 12+ moths will see some really healthy profits. When prices finally reclaim 3k, whether a person bought at 2,300 or 2,400 will be fairly insignificant. The most important thing is they were busy buying discounts when everyone else was desperately selling them.

On the other hand, if a person wants to lock-in short-term profits next week, I would definitely suggest shorting today’s strength. This market is stuck in a choppy basing phase and one day’s gains become the next day’s losses. While today’s stimulus headlines were great and worthy of a 10%+ pop from Monday’s lows, now that we are at much higher levels, chances are good the next move is lower.

As strange as it sounds, I truly believe a person should be both buying and shorting this market. The distinction comes down to whether they are doing it with their long-term investments or in their short-term trading account. (You use both strategies, right?)

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Mar 24

Why both bulls and bears insist on losing a lot of money

By Jani Ziedins | End of Day Analysis

Free After-Hours Update

The S&P 500 surged more than 9% today, putting up one of the market’s strongest performances in 100 years. While nothing concrete happened, stocks rallied in anticipation of Congress’s comprehensive stimulus bill that is inching closer to becoming law.

Who could have possibly seen today’s huge rebound coming? Easy, anyone who’s been paying attention. (Or at least reading this blog.) The strong, unidirectional moves are long behind us. This market entered the choppy, basing period a couple of weeks ago, typified by extreme volatility in BOTH directions. While it feels like the market’s done nothing but go down over the last two-and-a-half weeks, that’s hardly been the case. Over this period, we’ve seen up-days of +5%, +9%, +6%, and now today’s +9%. In fact, nearly every day over the last 12 sessions alternated between huge gains and towering losses.

As much as bulls and bears want to believe the next move will be a huge, multi-day rally or collapse, we are most definitely in the choppy phase of this correction and that means a lot of back and forth. One day’s dip is followed by the next day’s pop. These are great swing trading opportunities for the bold and nimble, but it is chewing up anyone coming to the market with a strong bias. Savvy traders are buying these dips and selling these pops, not gloating on social media that the other side is dumb, only to be left looking like the fool 24-hours later while holding a pile of losses.

Chances are good we haven’t seen the lowest lows of this bear market yet, but rather than crash lower, further losses will be nibbling at the edges, like yesterday’s dip, only to see prices bounce back into the consolidation a day or two later. As we transition into the basing phase, almost all of these daily breakdowns/rebounds are false alarms that should be traded against, not jumped on.

Avoid the temptation to fall into the bull or bear argument. No matter what we believe long-term, if we want to trade this chop successfully, we need to be pragmatic. Even if we’re bullish, that means shorting an unsustainable move higher. Or if we’re bearish, buying the next oversold plunge.

There is a ton of money to be made in this chop. But that also means we can lose a lot of money if we go at this the wrong way. Keep your biases in check and you will be miles ahead of everyone else getting ground up by these swings.

As for what comes next? Look for today’s huge rebound to fizzle and retreat back to the lows. Maybe this reversal starts tomorrow at the open. Or maybe we rally into midday before running out of buyers. Either way, be ready to short the next stumble. There is a good chance the next leg lower will follow the stimulus bill’s announcement in a classic buy the rumor, sell the news reversal.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

Mar 23

Should we be buying or shorting these levels?

By Jani Ziedins | End of Day Analysis

Free After-Hours Analysis

The S&P 500 tumbled another 3% Monday and set fresh lows for this selloff. Overnight futures were limit down, holding 5% losses for most of the night after the Congress failed to agree on a bailout package Sunday night. But spirits lifted shortly before Monday’s open after the Fed said they were prepared to buy “unlimited” Treasuries and mortgage-backed securities. Unfortunately, further gridlock on Capitol Hill rained on the Fed’s parade and is why stocks ultimately closed lower on Monday.

Higher, lower, or finding a bottom? That’s the question on everyone’s mind. Plenty of bulls are claiming this is a buyable dip while countless bears are screaming this is still the shorting opportunity of a lifetime. Who is right? At this point, both sides are doing nothing but blindly guessing in the dark. But they certainly don’t lack conviction in the accuracy of their blind guesses!

This is far and away the most uncertain time in anyone’s living memory, yet that uncertainty isn’t preventing anyone from telling us what they are convinced will happen next. I wish I had an answer for you, but no amount of fundamental, technical, or historical analysis will give us the answer. This situation is unique and it needs to be treated as such.

But just because this Coronavirus crash is unique doesn’t mean it will end any differently than any of the other “unique” crisis the market navigated. Assuming society doesn’t collapse, this is a buyable dip and is no different than any other crisis in market history. The only question is how low we go before bouncing.

Markets have fallen nearly 35% in a month. Could they fall 45%? Sure. But 6 months from now, how many people will be bragging about selling stocks when they were down 35%? Or is it more likely people will be bragging about buying stocks when they were down 35%?

The time to sell was four weeks ago when these waves of panic first hit the market, not now that the majority of the damage has already occurred. While prices could fall even further over the next few days and weeks, twelve months from now, no one will regret buying stocks at the lowest levels since 2016.

Once you admit you cannot pick the bottom, it simply becomes a choice between buying too early or too late. Either approach works well as long as it is consistent with a well thought out trading plan that includes risk management appropriate for this situation. (ie starting small, only buying sensible entry points, and keeping a valid stop nearby.) Don’t fall for the bull or bear arguments, be a pragmatic opportunist and the profits will come to you.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM

1 2 3