Now that we have a mountain of profits, how to protect them

By Jani Ziedins | End of Day Analysis

Mar 29

Free After-Hours Analysis: 

Tuesday was another great session for the S&P 500 as the index finds itself comfortably above 4,600 resistance.

This rebound amassed more than 450 points in two weeks. Nearly 10% if you like counting that way. And it added up to a huge pile of profits if you traded this rebound in a 3x ETF, as I do.

Not bad for a few weeks of “work”. The only thing we had to do was hold and keep lifting our trailing stops.

But now that we have a big pile of profits, what should we do next?

Protect them, of course!!!

Rarely does the market give us such a fast and easy trade, but as they say, don’t look a gift horse in the mouth. Only a fool is expecting this easy ride to continue.

Now that we’re at the highest point since the 2022 correction started and within 200 points of all-time highs, we should expect the rate of gains to stall, if not outright retrench in a very normal and healthy step-back.

Retesting 4,400 wouldn’t be a surprise. In fact, that step back is far more likely than continuing to record highs above 4,800.

But rather than try and predict what’s coming next, savvy traders are making sure their trading plan is ready for both 4,400 and 4,800.

The best way to straddle this fence is holding for higher prices while snugging up our trailing stops to mid to upper 4,500s.

If the market goes up, great, I make even more money. If the market retreats, I lock in a pile of profits and get ready for the next trade. That’s a win-win in my book.

As I wrote in early March, markets move in waves. This is just as valid at the bottom of the wave as it is at the top of the wave. It’s been a very profitable ride. Just make sure we don’t screw it up by letting those huge profits escape.

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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.