How savvy traders traded Thursday’s volatility. Plus what Bitcoin owners need to keep an eye on.

By Jani Ziedins | End of Day Analysis

Feb 10

Free After-Hours Analysis: 

The S&P 500 took us on another wild ride Thursday.

Volatility kicked off when the consumer price index surged at the fastest rate in 40 years. That sent traders scrambling for cover and the index gapped 1.3% lower at the open. But as is often the case, the opening gap reversed within minutes and it wasn’t long before the index found itself back near breakeven.

Unfortunately, that early dip-buying proved fleeting and the index retested the early lows in midday trade. And when a bounce fizzles, the selling rarely stops at breakeven. By the close, the index found itself down nearly 2%. Ouch!

But this wasn’t unexpected. As I wrote Wednesday evening:

Expecting this 10% rally to keep going is getting a tad greedy. Markets move in waves and it is worth remembering that at both the bottoms and the tops.

While I still like this market and will keep holding a trade that is working, it is time to shift to a defensive mindset and protect what we have. Move stops up and see where this goes, but no one should be surprised if this stalls near 4,600 resistance and rests for a bit.

Sign up for free email alerts so you don’t miss the market’s next big turning point.

Thursday’s price action did more than pause and rest, but that’s the way this goes sometimes.

As I wrote Wednesday evening, I can into Thursday holding the latest bounce off the 200dma and had a decent profit cushion. While I obviously wasn’t happy with the opening gap lower, I knew better than to overreact to early weakness. Instead of punching out at the open, I gave the market a few minutes to find its footing and that’s exactly what it did.

That bounce was my signal to keep holding and move my stops up near the early lows. Unfortunately, that early bounce didn’t stick and I got dumped out near 4,450. But that’s the way trading goes sometimes. I collect my profits and get ready for the next trading opportunity.

Maybe prices bounce Friday and I get back in. If that’s the case, no harm, no foul. Or maybe the selling continues Friday. If that happens, I continue sitting on my hands and wait for the next bounce.

At this point, I don’t really care what happens next. The only thing that matters is that I’m standing in the right place at the right time when the next move takes hold.

While bulls and bears argue about whether this market is going a lot higher or a lot lower, I will continue playing both sides of the fence. IMO, there is too much money to be made riding these waves to get hung up on labels and who is right and who is wrong.

Bring on the volatility.

For the first time in a while, Bitcoin is actually outperforming the equity indexes. The breakout above $40k resistance was a buy signal for anyone that missed last month’s bounce off of the lows.

While Bitcoin is trading well for the moment, I am wary of a near-term sell-the-news event following this weekend’s Super Bowl.

There is no reason to sell prematurely based on something that could happen. Instead, we move our stops up and trade what is happening. And for the moment, Bitcoin is trading well.

Just don’t get complacent if we see weakness next week.


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.