Thursday gave us another rough start for the S&P 500 and the index easily undercut last week’s lows. But rather than trigger a follow-on wave of defensive selling, supply dried up and prices bounced back above 3,900 support before the close.
Sometimes things appear the most hopeless moments before turning around. Between violating 3,900 support in a poor finish Wednesday afternoon, gapping even lower Thursday morning, undercutting last week’s lows, and crashing through the 50dma, everything lined up for a free-fall. And that’s exactly when the market found a bottom and bounced.
We could dissect employment reports, Fed comments, and Congressional testimony, but in the end, the only thing that matters is how the market reacts and it actually took all of these developments in stride. Rather than devolve into a herd of panicked sellers, confident owners shrugged and kept holding.
Thursday’s dip and bounce wasn’t dramatic enough to qualify as real capitulation, but it was good enough to confirm most owners still don’t want to sell. As long as they continue holding for higher prices, dips will remain shallow and quick.
Following a similar theme, TSLA slumped back to $600 support before catching a bid and finishing the day closer to the mid-$600s.
So far so good. TSLA remains ownable above $600 support and we can keep holding. But if prices retreat and fall under $600 support, this turns into an attractive shorting opportunity.
With such a powerful momentum stock like TSLA, there is only hot or cold. Either we are riding a wave higher or we are getting out of the way. A violation of $600 support means there is more pain ahead and we should do our best to avoid getting pulled down in another wave lower.
It is okay for a person to be both bullish on the stock and also defensively locking in profits when prices retreat past our trailing stops.
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