Monday was another good session for the S&P 500 and the index is quickly approaching multi-month highs.
Headlines remain the same, which is to say, dreadful. But if these things haven’t killed our economy yet, we will get through this. At least that’s what most investors are currently thinking.
While bears don’t agree with this latest runup, it makes a lot of sense when you look at the underlying supply and demand.
The 2022 correction started nearly three months ago and it’s been dragging on ever since. Three months is an eternity in the stock market. If nervous owners haven’t bailed out by now, chances are good nothing will convince them to sell.
If people want to know why stocks have already recovered 2/3 of 2022’s correction, it’s because we ran out of fearful sellers. And more than that, those fearful sellers were replaced by confident dip buyers. Out with the weak and in with the strong, that’s an obvious recipe for a market rebound.
While these things seem obvious now, for those of us that have been paying attention, it was just as obvious two weeks ago when stocks were probing the lows.
Back on March 9th, I wrote a post titled “Did you buy the bounce? If not, why not?“:
I follow the market’s lead and Wednesday [March 9th] the market was telling me to buy the bounce.
If prices continue higher Thursday [March 10th], great, I add more. If the bounce stalls and retreats, no big deal, I get out near my entry point and try again next time.
Maybe this is the real bounce. Maybe it is another false bottom on our way lower. Either way, my trading plan has me covered. Buy the bounce, sell the breakdown, and repeat as many times as necessary.
The next big bounce is coming and it will leave a lot of people behind. Luckily, I won’t be one of them.
If you were left behind, learn from that mistake. Sign up for my free email alerts so you don’t miss the next big trading opportunity.
400 points later and this is the time to be taking profits, not adding new money. If you missed this trade, wait for the next opportunity because the risk/reward is not in our favor.
As the saying goes, it is better to miss the bus than get hit by the bus. Don’t worry, another one will be along soon enough.
What’s good for the goose is good for the gander. The indexes are bouncing hard and they are taking most of the high-flying stocks with them. Not to be left behind, TSLA is up more than 40% from the lows of two weeks ago!
Without hesitation, we sell stocks when they violate our stops, but just because we got out doesn’t mean we give up on a trade. Stick with it and buy the next bounce and you can be pocketing 40% profits like this move in TSLA too.
Sell the breakdown, buy the bounce, and repeat as many times as necessary.
Move stops up to $1k and see where this goes.
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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.