Monday presented us with another boomerang session as the S&P 500 swung from -1.5% midday losses to finishing up +0.6%.
There were not any new headlines driving this whiplash and instead these gyrations were propelled by the market’s ongoing tug-of-war between bulls and bears.
Fear the collapse or buy the discounts? That’s the million-dollar question.
While lower prices could very easily be ahead of us, the midday bounce off of 4,200 support gave us the perfect bounce entry. No matter how this trade turns out, it will be hard to go wrong buying this bounce. Start small, get in early, keep a nearby bounce and add to a position that’s working.
Anyone following these simple rules is already sitting on a comfortable pile of profits and can move their stops up to their entry points, giving themselves a free trade. Even if the selloff resumes Tuesday, we get out near our entry points, no harm no foul. And if the rebound continues, move our stops up and let those sweet, sweet profits come to us.
While bulls and bears are busy arguing over what’s coming next, I’m over here minding my own business and collecting profits. When it comes to partisanship, I’m an equal opportunity capitalist.
If the rebound continues Tuesday, lift our stops. If the selling resumes, get out near our entry points and wait for the next bounce. Simple as that.
This isn’t my first bounce buy and it probably won’t be my last bounce buy, but as long as I keep getting out near my entry points when these bounces fizzle and fail, I’m in great shape. The most important thing keeping at it so I guarantee I will be standing in the right place at the right time when this thing finally pops. Just like back in mid-March when I caught that 450-point rebound in a 3x ETF and was printing money.
And even if we are falling into a bear market, that’s okay too, because bear markets have the biggest bounces.
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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.