The S&P 500 lost 1% Thursday. The recent spike in Covid infections unnerved investors and Monday’s bullish vaccine headlines are already old news.
Are we standing on the edge of a precipice or at the lower end of a longer-term trading range? That’s a great question and there are a million different opinions being shared online. And to be honest, both sides have great arguments.
What’s a person to do when the market could break either way? As obvious as this sounds, follow its lead! If stocks are going to breakdown, prices will have to cross 3,500(ish) support first. If we’re staying in a trading range above 3,500, then obviously prices will remain above 3,500.
This isn’t rocket science. Short a break under 3,500(ish) and buy a bounce off it. Put a stop on the other side of 3,500(ish) and wait to collect your profits. If the first move proves to be a false alarm, no big deal, close and trade in the opposite direction.
Emotional markets give us some of the best trades because they are prone to large, one-way moves. No matter which way this goes, grab ahold and collect your profits a few days later. It doesn’t get any easier than that.
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, 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 children.