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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It’s been six days since I wrote the free post titled “Why this market is still buyable“. Back then the S&P 500 was 10% short of all-time highs. Today, we find ourselves only 5% away from that “unthinkable” mark.
As I wrote back then:
This paradox largely comes down to expectations of a quick recovery combined with unprecedented levels of government stimulus. As bad as the economy looks today, when governments are throwing unlimited resources at the problem, that’s enough to placate investors.
Nothing’s changed since then and is why prices keep marching higher. At this point, why argue with what is working? The index is almost certainly headed back toward all-time highs and the only real question is what happens after we get there. But as nimble traders, we can worry about that when we get there. Until then, enjoy this ride higher and keep moving your trailing stops up. Right now, some stops near Thursday’s close and another portion near Friday’s intraday lows look to be be pretty good levels.
Now, maybe this rebound is getting a bit too obvious to everyone and that causes these gains to stall short of all-time highs. But as long as we respect our stops, it won’t be a problem. In fact, for the disciplined and nimble trader, near-term dips are simply another profit opportunity.
As the cliche goes, “plan your trade and trade your plan”. Until something changes, keep giving this market the benefit of doubt.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
The S&P 500 continues racing ahead of the economy and is now less than 10% from all-time highs. The fastest economic contraction since the great depression and stocks are only down single digits? That’s the world we live in.
As I’ve written previously, this paradox largely comes down to expectations of a quick recovery combined with unprecedented levels of government stimulus. As bad as the economy looks today, when governments are throwing unlimited resources at the problem, that’s enough to placate investors.
As much as it seems like this market is ripe for a near-term dip and consolidation, it keeps chugging higher instead. I took some profits last week because that is always the smart thing to do following a strong run, but this week’s strength tells us it is already time to get back in. Maybe we are getting close to the top and these latest purchases will get stopped out prematurely. Or maybe this thing still has room to run. Either way, as long as we are thoughtful with our trading plan, entry points, and stops, we will be in good shape no matter what the market does.
As long as prices remain above last week’s close, this market is still ownable. If prices fall under this level, shift to a more defensive stance to protect our profits. We only make money when we sell our winners and it is foolish to let a good trade evaporate before our eyes. As nimble traders, it is far easier to get back in than it is to will the market higher after it took back all of our paper profits.
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By Jani Ziedins | End of Day Analysis
Free After-Hours Analysis:
It took a while, but TSLA finally broke away from $800 resistance. The stock first returned to this key level in late April but it has been suck drifting mostly sideways ever since.
As I wrote back in April, the first time we rallied to $800 was a great time to lock-in profits following a soilid breakout from $600. We only make money when we sell our best positions and anyone insisting on more than 30% over a couple of few weeks is definitely getting greedy.
The great thing about taking profits proactively is we can always get back in. When the stock held firm near $800 instead of hitting its head and retreating, that told us this was still buyable as long as prices held above $800. There were a few wobbles along the way, but whipsaws are part of this game and only a problem if we get discouraged and give up. The patient investor that stuck to their trading plan was finally rewarded with today’s nice pop. As the saying goes, better late than never.
Maybe this is the breakout we’ve been waiting for. Or maybe it is nothing more than a sympathy pop because Elon’s other company, SpaceX, made history this weekend after it safely launched astronauts into space. Either way, TSLA’s breakout is a good trade to participate in as long as we jumped aboard closer to $800 and have a stop near this level. In fact, those that have profits in this should at the very least move their stops up to their entry point, giving them a (mostly) free trade.
If TSLA’s strength was due to nothing more than a SpaceX sympathy plan, the air will probably come out of TSLA over the next few weeks and prices will retreat back to $800. If we bought right and moved our stops up, no big deal. It was a good trade and totally worth trying. That’s because the other possibility is a follow-on surge of buying that rechallenges $1k resistance. Win and we make money. Lose and we get out at our entry-level. Hard to argue with that risk/reward. While I don’t know if this breakout is the real deal, my trading plan has me covered no matter what happens next.
Looking ahead, if the stock rallies up to $1k over the next few weeks, that’s our chance to do this all over again. Take profits near the next resistance level and wait for prices to dip. If they don’t, then we have to greenlight to buy the next breakout.
If you find these posts useful, please return the favor by liking and sharing them!
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What’s a good trade worth to you?
How about avoiding a loss?
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Follow Jani on Twitter @crackedmarket
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