Monday was a do-nothing session for the S&P 500 as it finished exactly where it left off Friday. (The index closed down 0.001%, technically making this a red day, but that is splitting some pretty fine hairs.)
The thing to remember is boring is bullish. Fragile and weak markets tumble quickly, they don’t defy gravity by holding near the highs for weeks. If this market was truly overbought, last week’s crack was more than enough to trigger a larger wave of reactionary selling. Instead, supply dried up and prices bounce.
Now, I count myself as one of the skeptics. It definitely felt like prices got a little too high a little too fast since the October lows. But never forget we trade the market, not our opinions. That’s why I bought back the positions I sold defensively last week.
There is nothing wrong with taking worthwhile profits following a nice run, especially when the market is flashing warning signs. But when the expected pullback doesn’t happen, that in of itself is a bullish signal and we need to get back in. (A market that refuses to go down will eventually go up.)
Now, maybe Friday’s bounce was a false bottom and stocks are still headed lower after a little delay. But for that to happen, prices first need to undercut last week’s lows. Until that happens, this latest bounce remains alive and well.
Continue holding with stops spread across the mid-4,600s and see where this goes. If we get dumped out again, no big deal, sell at our stops and be ready to buy the next bounce, even if it happens a few hours later.
TSLA is on a wild ride. Live by Elon, die by Elon. But long-term owners know this and this stock hasn’t always been an easy hold. But as I said last week, as long as this remains above $1k, the latest bounce remains holdable. Fail to hold $1k support and it is time to lock in profits and wait to buy the next bounce.
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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.