The S&P 500 finished Tuesday mostly flat (-0.1%) after spending all day bouncing between small gains and losses. But flat after adding nearly 120-points over the previous three sessions is actually quite constructive.
Everyone knows stocks cannot go up every day, so pinning our hopes on a fourth, fifth, or sixth strong day is unreasonable. But holding all of last week’s 4k breakout and most of yesterday’s strong follow-on gains tells us investors are not rejecting this latest push to all-time highs. Confident owners continue holding for higher prices and few are interested in taking profits at these record-high prices.
No matter what the cynics claim about complacency, as long as confident owners keep holding for higher prices, supply remains tight and it is easy for stocks to keep rallying. As the saying goes, what is high tends to get even higher.
This bull market will fall like all of the others that came before it, but this is not that time. Stick with what has been working and that is holding for higher prices and moving up our trailing stops.
GME is a buy above $200 but it is struggling to close the deal and it cannot get above this key resistance level. Fail to deliver on this obvious breakout and this starts looking more like stalling than resting and we need to be extremely careful.
This is a perfect example of why we must wait for confirmation before jumping in. Sometimes close isn’t good enough and this is one of those instances where it is safer to be a little late than a lot early.
Wait for the $200 breakout and we can buy the bounce for a quick trade, but only after this gets above $200.
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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.