Why “do-nothing” is bullish for stocks, plus how a false-alarm in $TSLA gave us a great trade

By Jani Ziedins | End of Day Analysis

Apr 30

Free Weekly Analysis: 

It was another do-nothing week for the S&P 500 with the index finishing almost exactly where it started. Combined with the previous week, the market moved exactly 0.11% over the last ten trading sessions. But for a bull market with plenty of reasons to fall, flat is a meaningful accomplishment.

Absurd valuations. Rising interest rates. Inflationary money printing. Looming tax hikes. Pick your poison. Yet this rally continues defying the skeptics.

Rather than argue with this market, smart money is going along for the ride. Don’t fight what is working and keep holding for higher prices. Leave your stops in the mid 4,100s and see where this goes. And if we get stopped out next week, guess what? You can always get back in when conditions warrant it.

Selling doesn’t mean we have to give up on a trade. Ask ask all the people who got left on the sidelines following November’s, February’s, and March’s dips. Think they are kicking themselves for not jumping aboard the rebound?

Stay safe by always respecting your stops, but never be afraid to buy the next bounce even if it happens a few hours later.

A market that refuses to go down will eventually go up and odds are really good we haven’t seen the top of this bull market.

TSLA retreated under $700 support this week and for many people, that meant locking in some profits defensively. But as is often the case, the dip proved to be a false alarm and prices bounce back above $700 Friday.

While a lot of people feel foolish buying back in after selling a false alarm, the only other alternative is holding a larger pullback all the way down to the bottom. Personally, I know which “mistake” I’d rather make.

As for TSLA’s latest violation and rebound, this was an excellent opportunity to start a new trade. Buy the bounce and leave a stop just under support. While chances are good this bounce won’t stick, with such a clear entry point and sensible nearby stop, the risk/reward is skewed heavily in our favor.

$700 remains a critical level. Hold above support and everything is good. Fall under and it is time to get defensive (and an aggressive trader can short the violation).

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About the Author

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.