The S&P 500 recovered 100 points in little more than 24 hours. As I often write, markets bounce hard and fast from oversold levels and the last two sessions of buying frenzy definitely count as hard and fast.
While Powell and the Fed keep talking up near-term rate hikes to combat inflation, aside from this little wobble, the stock market doesn’t seem all that concerned. After five days of selling, supply already dried up and confident dip buyers have cut those losses in half. If this is the best bears can do, we don’t have much to worry about.
While both bulls and bears will tell you they know for certain what is going to happen next….in reality, both sides will probably be right. Prices will fall further, initially proving bears right. But inevitably, every selloff finds a bottom and prices bounce, proving bulls right.
The market fell another 100 points after I wrote that … and it has since reclaimed all 100 of those points.
While this up and down is a wash for most investors, for the nimble traders among us, selling high and buying low is the name of the game. Rather than sit through these dips, hoping and praying they bounce, I get out, wait for the bounce, and get back in at lower prices.
Cutting my risk and getting paid for the protection? Trades don’t get any better than that!
Now, I will be the first to admit there are no guarantees in the market and this bounce could fail. But by buying midday on Monday, our entry points are well underneath current levels and we have a huge profit cushion. My stops are already at or above my entry points, meaning this is already a profitable trade for me even if prices collapse.
And guess what? If I’m wrong and the market noses over later this week, even better. I get out above my entry points, collecting a small profit for my effort and then I get to buy even bigger discounts next week. Go up and I win. Go down and I win. Learn to trade proactively and this could be you too.
TSLA bounced nicely off of $1k support Monday, giving us an attractive entry for this popular high-flying stock.
For those of us that bought TSLA’s last bounce off of $900 and followed it up to $1,200 with a trailing stop, we locked in some really nice profits. And a few days later, we are already buying back in, ready to do it all over again.
I don’t know if this bounce off of $1k support will stick or not. But by getting in early and keeping a nearby stop, the risks are low and the rewards high. These are the setups we dream of.
If it doesn’t work, no big deal, I get out and 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.